'Margins in newer towns can be huge'

BANKERS SPEAK: Jaspal Bindra

Jaspal Bindra

Jaspal Bindra, regional chief executive - south-east and south Asia at Standard Chartered Bank, was earlier this month appointed on the board of the UK-based bank, which has operations predominantly in Asia and Africa. With his base in Singapore, Bindra travels to India at least once in six to eight weeks. In an interview with Anita Bhoir and Rajendra Palande, the 46-year-old Bindra says the additional responsibility of being on the board of the international bank would now require him to frequently travel to London but certainly won't curtail his visits to India, a key market for Standard Chartered group. Excerpts:

What's the significance of your inclusion in the board of Standard Chartered Bank?

It is a great signal that the bank has sent (about the importance it attaches to India). It is (also) a compliment to Indian talent and Indian management. India is on the forefront for the (Standard Chartered) group.

There is a general perception that Standard Chartered is not very aggressive when it comes to retail banking and has not utilised enough its strengths including the consumer finance NBFC like its peers. How do you react to this?

For Standard Chartered, the NBFC is not the prime vehicle of sourcing business. For us, the bank is the prime vehicle. The NBFC is just a distribution channel. Unlike other banks, you would have noticed we do not open NBFC branches at locations where we have bank branches.

As a bank, we are increasing our distribution channel by adding new branches, ATMs, using the subsidiary outlets and also increasing the headcount of direct sales agents. In the age of technology, reaching out to customers is not a concern.

We are not using the subsidiary as a surrogate to do banking in the country. The bank's NBFC, Prime Financial, ramped up its network by adding 16 more offices to take the total to 50 in the first half of 2007-08.

There are rumours that Standard Chartered Bank wants to sell its credit card business in India...

We will remain a small player in the credit card market. The rate of growth in card business is affected partly on account of market forces. You can grow volumes but then the quality of the portfolio tends to get affected. We have a card base of 1.5 million.

The RBI has been pushing the agenda of inclusive banking. We have seen the regulator give foreign banks branches in remote locations. Do you see this restraining the bank's growth?

As a national, I sympathise with the RBI's view that banks need to enter the under-banked areas. The business opportunities and margins offered by newer towns is more than less.

Recently, the bank received RBI approval to set up branches in Siliguri and Jalgaon. We could be quite a fancy bank in these small towns, with the kind of ambience that we would be providing at the branches there.

However, it's comforting to note that the regulator has granted us branches in 29 of the locations that we had listed. Siliguri was among the top preferences in our list.

Siliguri is cash rich and is a convergence point for north Bengal and the north eastern region. It's a hub for tea auctions. You have a booming tea and timber industry, good schools and a big army base.

It's a booming economy. I know the place because I studied in Darjeeling, though the reason for choosing the town was based on internal research.

Though Jalgaon was lower in the our order of preference, it is economically an important town. And now it is also the hometown of our new president. We might also not have private sector competition in these towns for sometime.

The bank has seen major share of profits coming from corporate business. The rise in profit was more on account of the large M&A deals that the bank advised. Do you expect this corporate activity to continue and sustain your high profit growth?

There is a distinct trend in the corporate world. There are companies going global, some are active in international trade and others are the ambitious lot which want to be mega scale companies. They want to cash in on the growing domestic demand.

My own belief is, heightened corporate activity will continue to grow as they look at new dimensions in terms of how people deal in derivatives, hedge commodity price risks with exchanges in place, raise capital and structure transactions.

In India, of the total income generated through the corporate book, around 35 per cent comes from fee income and the balance comes from non-fee.

Are Indian banks giving you competition in the structured finance space?

Indian banks selectively have been a strong competition. However, we continue to have the advantage of international network and product expertise.

The bank has expressed interest in acquiring a stake in UTI Securities. How would this fit in your India business plan?

Standard Chartered Bank relies on third-party trading platform for its equity broking business. The growth in business volumes in wealth management and the private banking space justifies having an in-house trading platform.

Whatever stake we get in UTI Securities, our intention is to have some share in its management. Apart from this, the only service that I can think of which is missing in the bank's portfolio in India is Islamic banking. Islamic banking has not taken off in India. Whenever the regulations permit, we would introduce it.

How hopeful are you of the banking sector opening up in 2009?

The sector will open; how and how much is something one will have to wait and watch. Being an election year, it is difficult to predict. It is, however, likely to be a gradual process. Acquisition is one way of growth. We will certainly look at opportunities and the price at which they come.