After relying on wholesale deposits for the past few years, Singapore-based DBS Bank is planning to diversify its liability mix and acquire retail liabilities through the eight new branches it opened in India last year. DBS Bank India General Manger and Chief Executive Officer Sanjiv Bhasin tells Sidhartha and Sudeep Jain how the retail market is evolving and why his bank is not planning to enter the retail assets space any time soon. Excerpts:
When you go out and meet clients, how easy or tough is it to get people on board since you have a limited presence in India and not many people outside Mumbai or Delhi would have heard about you?
A limited presence is not a challenge, but a presence which is recognised for quality customer service is difficult to establish. We have expanded our presence to 10 branches in 10 cities and customer service will remain in the forefront of our offering.
We hope that over a period, this recognition will help us in expanding our customer base and attract quality talent. A similar commitment to service standards will guide us towards establishing a healthy retail presence.
So what’s your mix in terms of revenue?
At present, a very large proportion of our revenues is obtained from wholesale banking. Within that, contribution comes from treasury products, loans, trade services, cash management and other advisory services.
Efforts are in place to expand in the retail liability space. Over a period of time, this business along side our wealth management offerings will start contributing effectively, enabling us to diversify our income streams and also the risk.
In the last 5-6 years, banks were in a rush to launch retail asset products along with retail liabilities. Why haven’t you got into that business?
We believe that generating assets for balance sheet is relatively easier than accessing liabilities from the market. Therefore, we wish to get our liability acquisition piece in a perfect state before we think of launching retail asset offerings.
Asset products for the consumer market require management bandwidth, suitable technology platform, effective collection systems and a well-established distribution network. We wish to establish our infrastructure properly before we launch our presence in the retail asset space.
Given the limitations on branch expansion for foreign banks in India, does it make sense for a foreign bank which is entering at a relatively later stage to start with the mass-affluent section or is it better to start with high networth individuals (HNIs)?
The business model and customer segmentation always varies for every institution and it is very difficult to generalise this across the banking industry. Based on the resources available with us, we have decided to launch consumer banking presence in the high net worth and emerging affluent sections.
Also, the credit cycle would have turned by then...
As indicated earlier, we have no plans to seek a presence in the retail asset market for the next eighteen months. Initially, we plan to distribute third-party wealth management and insurance products along side our liability gathering exercise. It is best that I address this question as and when we offer retail assets.
Do you have the RBI permission to open any more branches?
In the last financial year, we opened 8 branches to take our total branch presence in India to 10. We are committed to building a universal banking franchise in India and hope to work with the regulators to further expand our branch footprint.
Would you be interested in converting this branch into a company when the regulations permit or do you want to continue as a branch?
This is a hypothetical question. Some decisions become relevant at a stage when one has a sizeable scale and presence. Our business in India, though growing fast, is not large enough as yet. Having access to both capital and liquidity, we are focused on building a profitable franchise.
What about acquisitions?
At the moment, we are concentrating on growing our franchise organically. Going forward, should a suitable opportunity arise for inorganic growth, confirming to prevailing regulations, we will prudently look at it.
What will be your focus in the retail assets space, since the NBFC (non-banking finance company) in which you have a large stake is already into consumer and auto finance?
We must admit and accept that the market is constantly changing and the manner in which customers can be serviced is being influenced significantly by technology. Product design and the size and nature of customers will change constantly over the short to medium term. These changes will influence if we require to manufacture and distribute products or if third-party products distributed within our franchise can promise business growth of the scale we desire.
But that only takes you up to a point. Beyond that, you have to manufacture and distribute.
We will keep this decision on the radar, evaluating all options on a regular basis.
What’s your retail liability target for the current year?
We do not believe in absolute target, but it is our keen desire that the size of our retail liabilities should be at least a quarter of our total liability portfolio in the medium term. We have a long way to go, but remain confident about getting there.
