 "We will not press the growth pedal too much: Romesh Sobti")
Romesh Sobti, Managing Director and Chief Executive Officer of IndusInd Bank, tells Nupur Anand that the bank will continue to grow at 25-30 per cent, irrespective of whether the economy is weak or strong
You took over the reins of the bank in the midst of a severe financial crisis. How has the journey been since then?
The Lehman crisis was a great learning. The crisis taught us a few things - how to manage your balance sheet, how to manage liquidity. In a way it also brought a bit of pricing power into the bank. It also became easier for us to attract talent, as others were shedding talent. Fresh capital was also brought in every year, and that also helped.
Home loans are very long-tenure, very low-yielding loans. So you have an interest and a liquidity mismatch. You need to have a very efficient, low-cost business to do this well and we had a high cost-to-income ratio, though now it has come down. But with our tie-up with HDFC, we are still able to provide all the products to our customers.
Sixty per cent of your portfolio in 2008 was vehicle financing. It has come down to 36 per cent. Do you want to correct that skew?
The vehicle financing business has grown but other businesses have also grown and that is why the ratio has fallen. The corporate and the non-vehicle financing retail book have grown significantly, and that is why the share has gone down. So diversification is happening and the mix will change even further.
Some banks have got out of the two-wheeler business because of the risks involved. Do you still plan to play in that space?
The two-wheeler business is a high-volume, low-ticket business which has to be managed on a very process control basis. It is not an easy business but it is important, because when you get market share in the business then your ability to work with manufacturers increases, and it is helpful to the rest of the vehicle financing book.
How have you managed to keep delinquencies low in the risky two-wheeler business?
We have a large client base that takes vehicle loans. It is the same client base that takes two-wheeler loans as well. So if I have already financed trucks for the same person and if I am now financing a two-wheeler then it is risk-validated. So the huge client base is a huge advantage. Secondly, we do this business out of 1,100 locations. This is a touch business and you will not recover money by sitting in office and making phone calls, you need to have presence too. Moreover, in all our vehicle financing business we have an overriding theme - the vehicle that the borrower takes must be part of his livelihood chain, because if the loan was taken to meet luxury needs, he is more likely to default.
You have managed to grow at an average of 25 per cent even when the industry is growing at 10-12 per cent. How have you managed this in tough times?
We have managed to grow ahead of the industry by diversification of our books, expansion of our franchise and the further deepening of relationship both on the corporate and the retail side. We can even manage to grow at 40-50 per cent on this but we have chosen not to grow at that pace because if you press the pedal on growth too much, then you will discover NPAs three years down the road. Every boom is followed by a bust.
Your peers have taken the inorganic route to grow. Do you have similar plans?
We have always said that we are suitors and we are not sellers. We will continue to look at opportunities. We have deep-pocketed promoters, so selling is not an option for us.
You want to treble the credit card portfolio after buying it. What is the plan on that front?
We bought the credit card business as that was the missing link in our portfolio. It is a very profitable business for us but it is not a mass credit card play. We are focusing more on the spend side and not just the lend side. We bought it from Deutsche Bank for Rs 250 crore and by 2017 we will be Rs 1000 crore.
The board has approved your reappointment for a three-year term after January 2015. If the RBI also approves it, what will be the top three priorities in the next three years?
The first priority will be bringing scale while retaining our profitability. We plan to double our branch network and our customer base. Then the two new frontiers will be digital banking and rural banking. The third is a differentiated approach to our branch expansion plans in terms of geography, and that will be a big driver for our fee and Casa business.
You took over the reins of the bank in the midst of a severe financial crisis. How has the journey been since then?
The Lehman crisis was a great learning. The crisis taught us a few things - how to manage your balance sheet, how to manage liquidity. In a way it also brought a bit of pricing power into the bank. It also became easier for us to attract talent, as others were shedding talent. Fresh capital was also brought in every year, and that also helped.
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You still haven't entered the home loan market but you continue to offer it via HDFC. What are the plans on that front?
Home loans are very long-tenure, very low-yielding loans. So you have an interest and a liquidity mismatch. You need to have a very efficient, low-cost business to do this well and we had a high cost-to-income ratio, though now it has come down. But with our tie-up with HDFC, we are still able to provide all the products to our customers.
Sixty per cent of your portfolio in 2008 was vehicle financing. It has come down to 36 per cent. Do you want to correct that skew?
The vehicle financing business has grown but other businesses have also grown and that is why the ratio has fallen. The corporate and the non-vehicle financing retail book have grown significantly, and that is why the share has gone down. So diversification is happening and the mix will change even further.
Some banks have got out of the two-wheeler business because of the risks involved. Do you still plan to play in that space?
The two-wheeler business is a high-volume, low-ticket business which has to be managed on a very process control basis. It is not an easy business but it is important, because when you get market share in the business then your ability to work with manufacturers increases, and it is helpful to the rest of the vehicle financing book.
How have you managed to keep delinquencies low in the risky two-wheeler business?
We have a large client base that takes vehicle loans. It is the same client base that takes two-wheeler loans as well. So if I have already financed trucks for the same person and if I am now financing a two-wheeler then it is risk-validated. So the huge client base is a huge advantage. Secondly, we do this business out of 1,100 locations. This is a touch business and you will not recover money by sitting in office and making phone calls, you need to have presence too. Moreover, in all our vehicle financing business we have an overriding theme - the vehicle that the borrower takes must be part of his livelihood chain, because if the loan was taken to meet luxury needs, he is more likely to default.
You have managed to grow at an average of 25 per cent even when the industry is growing at 10-12 per cent. How have you managed this in tough times?
We have managed to grow ahead of the industry by diversification of our books, expansion of our franchise and the further deepening of relationship both on the corporate and the retail side. We can even manage to grow at 40-50 per cent on this but we have chosen not to grow at that pace because if you press the pedal on growth too much, then you will discover NPAs three years down the road. Every boom is followed by a bust.
Your peers have taken the inorganic route to grow. Do you have similar plans?
We have always said that we are suitors and we are not sellers. We will continue to look at opportunities. We have deep-pocketed promoters, so selling is not an option for us.
You want to treble the credit card portfolio after buying it. What is the plan on that front?
We bought the credit card business as that was the missing link in our portfolio. It is a very profitable business for us but it is not a mass credit card play. We are focusing more on the spend side and not just the lend side. We bought it from Deutsche Bank for Rs 250 crore and by 2017 we will be Rs 1000 crore.
The board has approved your reappointment for a three-year term after January 2015. If the RBI also approves it, what will be the top three priorities in the next three years?
The first priority will be bringing scale while retaining our profitability. We plan to double our branch network and our customer base. Then the two new frontiers will be digital banking and rural banking. The third is a differentiated approach to our branch expansion plans in terms of geography, and that will be a big driver for our fee and Casa business.