Business Standard

'We have a subprime problem brewing in PLs'

BANKER SPEAKS: Rana Kapoor

Image

Anita Bhoir Mumbai

Yes Bank, the newest private sector bank, has come a long way under the leadership of Rana Kapoor, the managing director and CEO, with a balance sheet size of around Rs 13,000 crore in just a span of three years. In an interview with Anita Bhoir, Kapoor said, "You have to visualise to materialise. Our mission is to build the finest quality brand in banking. We don't want to be a production factory. We want to be good distributors.'' A strong supporter of organic growth, he's confident of growing the bank at about 70-90 per cent over the next three years. The bank plans to raise around Rs 500 crore of tier-I capital in 2007-08. Excerpts:

How far has the bank come in the three years?

Our emphasis continues to be on building quality retail infrastructure. In retail, we are still in the formative stages. Unless the bank has 100 branches, there is no clear take-off.

At present, we have 60 branches. We have received 56 fresh branch licences and 200 ATM licences. The bank will roll out these licences rapidly in tier-I and tier-II centres by March 2008. We should reach the magical number of 100 by March 2008.

What's the key in your expansion strategy?

We have identified eight regions, within which we have carved out 40 clusters. Every cluster will have a hub branch, which will be the main bastion for that cluster. This business model will enable the bank optimise operational and technological efficiencies.

On the external side, it will help the bank garner business, build synergies and cross-sell. Each cluster will cater to the demographics and the business needs of that region.

For instance, Nashik is the agricultural hub of Maharashtra, so we are developing a grape insurance product for that region in association with the Agriculture Insurance Company of India (AIC). Swiss Re is also helping us in this proposition. While the Nariman Point branch will offer various wealth management, treasury and trade related services.

What's driving your advances portfolio?

On the advances side, we have adopted a cautious approach, which pre-dates the subprime problem in the United States. In the Indian context also, I believe we have a subprime problem brewing in personal loans, two-wheeler loans and housing loan segment.

We think that the economic momentum is so great that past problems can be ignored. We have seen the retail business being highly commoditised and there has been a virtual price war in the market. Only in the past nine months, we have seen some corrective measures. Risk matrix is being redefined. Currently, the retail business is in a period of transition.

In which segments of retail is Yes Bank present?

Yes Bank has launched personal loans for individuals and small businesses on a pilot basis in nine cities. We plan to step it up gradually. By March 2008, we will launch it on a full scale. We don't want to be in businesses where the competition is formidable.

We have plans to enter the mortgage market and selectively offer auto loans by April 2008. In the second half of 2008-09, when we have a customer base of about five lakhs, we would embark on the credit card business. It will be a sequential rollout. We are aggressive on liabilities sales and sale of third-party products.

What is it that the bank would like to create a niche in?

We want to build a service and sales proposition. We have to create a service paradigm. We have to create a Jet or a Kingfisher kind of impact when it comes to customer service. Training and management of people is very important. We have built the Yes School of Banking.

Binoy Vasu is the head of learing and development. Here we conduct sales and service training to our lobby staff, sales force and telecallers. I tell my people banking is a perishable business and if you don't act fast, you will perish. We have a staff strength of 3,263, of which 2,000 were added in the last 12 months.

Which are the new business lines the bank is keen on growing and entering over a period of time?

We are making steady inroads into the financial advisory business, strictly implementing knowledge banking, developed structured products, infrastructure financing and agriculture lending. Thirty per cent of the bank's lending is to agriculture.

On the treasury side, our vision is to be a strong rupee home country bank. The country is moving towards capital account convertibility, hence we want to be prolific in the rupee. We want to further grow the small and medium, agriculture and microfinance businesses. We have a strategic unit within the bank, which works with state governments. Our aim is to be a key financial player in various public-private partnerships.

Would you look at other financial service businesses?

We need to diversify and be in retail broking, asset reconstruction and asset management businesses. We will have to set up separate entities for these. These businesses are not highly capital-intensive. We want to build a knowledge process outsourcing (KPO) unit to capitalise on the intellectual capital that we have. We will build this by 2010.

On the microfinance business, we have tied up with consulting partner Axion. The business is in the incubation phase. Microfinance will need institutional support for around 18 to 24 months. Hence, we will develop it within the bank umbrella before we hive it off as a separate unit.

Are you looking at any inorganic growth options?

If we can grow at about 70 to 90 per cent in the next three years, we can build a good organisation. Organic growth is different as it keeps the quality under control. We would look at inorganic growth options only if our organic growth is not according to our strategy.

You have built a quality bank in three years. Would you look at exiting in future or merging with a foreign bank in 2009?

We have a complete vision for the bank until 2010. We have the time on hand to build a neat and clean book. In the next two-and-a-half years, we must build a quality home country bank with an indigenous business model. We have the expertise to do so much on our own. We don't need foreign help.

In the life of the bank, there will be a stage when we will need to globalise. At that stage, we could look at offering a stake to a foreign bank, which can help us tap the global market and we could help them tap the domestic Indian market.


Don't miss the most important news and views of the day. Get them on our Telegram channel

First Published: Oct 12 2007 | 12:00 AM IST

Explore News