'We're focussed on supporting Indian firms globally'

BANKER SPEAKS/ Chanda Kochhar, joint managing director & CFO, ICICI Bank

From being a management trainee in the erstwhile ICICI in 1984, Chanda Kochhar has risen through the ranks to be the joint managing director and CFO of ICICI Bank, the country's second largest bank. Kochhar was promoted earlier this month in a top management reshuffle. In an interview with Anita Bhoir and Rajendra Palande, Kochhar tells how she's at an advantageous position to steer the bank after having worked in various capacities in almost every segment.
Excerpts:

What's the significance of the latest reshuffle at the top?

We have now become a larger and more complex organisation. We need to manage the bank as a whole and plan for different scenarios, in addition to handling individual businesses. This is an indication that a lot of developments are taking place.

I have been one of the few bankers, even by global standards, to have a broad view of a bank's functioning. One is normally cast as either a corporate banker or a retail banker, rather than being a universal banker.

What really helped in your evolution as a leader?

The hallmark of leadership is the ability to nurture talent. When the business is stable, you need to build leadership which can independently run the operations. This allows you to move on to bigger roles.

What will be your priorities now?

My thought process would be oriented towards planning better for all the bank's businesses. A better understanding of the opportunities and challenges in the various business segments would help in planning realistically for the future. So, my role would consist in looking at the bank as a whole. The growth in the economy demonstrates a lot of dynamism, change and challenges. We have to be thus quick in scenario planning and deciding the role of each business segment. I think the new role puts me in a great position to be able to do scenario planning for the bank as a whole.

What's your scenario planning model?

I am looking at the opportunities and potential sizes of each business, rather than preconceived percentages. This will reveal what the percentage role of each business should be. One will then look at the contribution of each business to the overall profits and decide on focus areas to maximise profitability. I now have to look at risks across the organisation as well. When the organisation becomes complex, risks are no longer business specific. There's an inter-play of risks.

Is there a change in the bank's overall strategy?

No, not really. There's no drastic change. But with the economy evolving so fast, it is important to constantly sit back and decide whether a change in direction is necessary. Small changes will keep happening, even if there are no major developments.

Why are you shouldering the CFO's responsibility, as it is normally seen as a full-time task?

When you look at the future and do scenario planning, it all boils down to financial impact and CFOs get closely associated in that sense. The future scenarios are in terms of business opportunities and challenges, all of which have an impact on numbers. So, one needs to look at the numbers to assess how changes would impact the bank. The responsibility involves not just scenario planning, but also scenario building, designing business plans and making sure that these are implemented by the various businesses.

What are the new initiatives planned by the bank?

Our focus area is corporate. We believe in the India growth story. We plan to set up an infrastructure fund and improve our long-term fund raising capabilities. On the global front, the focus is on supporting the growth plans of Indian companies although many global banks are shying away from taking exposures following the US subprime mortgage defaults. Though we would normally prefer working with global banks, we are now focussing on Indian companies, making sure that they complete their acquisitions. We will back them up with underwriting and loans, even if we have to hold on to larger exposures for additional six months. Many M&A deals, that would not have otherwise progressed, are taking place due to our efforts.

How have you managed to take large exposures?

We raised $2 billion in a difficult overseas market in the face of prevailing scepticism. The call had to be taken despite the higher pricing as the other option was not to sign the deals and deny support to the Indian companies. So, we had to lend at higher rates in order to maintain the margins. Companies were willing to pay extra. The bank's international balance sheet has increased to $23 billion at the end of the September 2007 quarter from $19.5 billion at the end of June 2007 and $17 billion for the quarter ended March 2007.

How will the approval to set up operations in the US help ICICI Bank?

Almost 33 per cent of the outbound M&As are done in North America. The approval will allow us to directly participate in those transactions, rather than going through other overseas branches and having to deal with withholding tax issues. It will also allow us to directly syndicate loans with other banks in that area. For example, the oil pipelines in the US are being replaced and many Indian companies are and setting up production units or buying units there to grab the opportunity. We will be able to meet the needs of these Indian companies directly. Taking the indirect route is not the most efficient as one could end up not doing some of those deals.

Will your international book outgrow domestic book?

The international book is 22 per cent of our total book and will hence take some time to outgrow the domestic book. But it will continue to grow at a high rate (rose by 145 per cent year-on-year as on September 30, 2007). Strengthening the net worth enables us to take large exposures both domestically and globally.

What will be your strategy on the retail front?

We would concentrate on increasing retail deposits to improve our cost of funds. Ensuring the growth of CASA would be a strong focus area.

Hasn't the share of corporate deposits increased tremendously?

The growth in retail deposits is very large, but our requirement of funds is even higher due to the lending opportunities. If we had stopped relying on corporate deposits and spurned lending opportunities, it would have shown a good ratio of retail deposits but affected the balance sheet.

What are the challenges going forward?

We are riding on good performance of the economy. The challenge is to ensure that current decisions hold us in good stead when the economy goes through a lean period. That's the big leadership challenge.