 "IDFC Bank, Rajiv Lall")
IDFC Bank, set to begin operations from October 1, has set a target of more than doubling its balance sheet to Rs 2 lakh crore in five years, says Rajiv Lall, executive vice-chairman and managing director. In an interview with Abhijit Lele and Nupur Anand, he explains why he has taken up the role of chief cultural officer in the organisation. Edited excerpts:
At 15 per cent of overall advances, you are starting with very high stressed assets. Also, you are starting the bank with bad loan provisioning of Rs 4,500 crore. Will that be enough?
We believe it will be enough; it is more than the regulatory requirement. What we have effectively done is created a mini bad bank within the organisation. We have created a team whose task is to recover what has already been provided for.
Recently, you secured the Reserve Bank of India's approval to use Rs 2,500 crore of reserves as provisioning against bad loans. How much would that help?
If infrastructure returns in three years, we will be in very good shape from a profitability point of view because every rupee we used in bond financing to fund the infrastructure book will not require PSL (priority sector lending), CRR (cash reserve ratio) or SLR (statutory liquidity requirement).
Your aim has been to be profitable from the first day.
Today, we have Rs 1,800 crore of profit; what we have done is moved the balance sheet to IDFC Bank and our cost has gone up. So, we'll still have, say, Rs 1,000 crore even after the expenses are incurred. Every year, we will increase that profit 10-15 per cent.
How difficult will it be to meet PSL requirements?
Yes, it will be difficult for us to meet the requirements in the first three to four years. The idea is to do aggressive PSL; we will take three to four years to get there. As the size of our balance sheet is huge, it will be difficult for us to meet the requirements on our own initially. So, we will have to pay a penalty and meet the requirements.
How do you plan to scale up business and what will be the key focus areas?
Our balance sheet will be in the range of Rs 1.5-2 lakh crore within five years. We are starting the balance sheet with Rs 70,000-80,000 crore. Of this, about two thirds will be corporate and wholesale banking, while a third will be personal and business (urban) and Bharat (rural) banking. In the personal business, banking mortgages will be a significant component. In personal and business banking, I think we will be able to acquire three to four million customers and in Bharat, 10-12 million across the country. That gives us a target of 15 million customers in five years.
The focus on technology will be a key driver. How do you plan to use it?
The world is moving to smartphones; so, the focus on technology design will be a phone. The idea is you should be able to do everything on a smartphone; you don't have to go to a bank branch. You should be able to get your queries answered 24x7; you should be able to withdraw cash in places that are more ubiquitous than automated teller machines. The idea will be to use technology to customise banking needs.
You have said focus on people will be a key priority. What are your plans on the hiring front?
The top management is in place. We have introduced the senior-most management team; the next 45 is the core, and they are already in place. There are another 150 people who will comprise the nerve centre of IDFC Bank; they are all on board. Currently, 1,200 people are on board we expect to go to 2,500-2,700 by March-end. The cultural aspects of this are the toughest.
What challenges have you faced in the past 18 months?
Since the idea is to do hatke (different) banking, we have to redesign all processes. One of the challenges of training has been hiring. That is because we have been hiring from other banks; they came with their own baggage of how things work. Co-creating a training programme and cultural acclimatisation with us takes time. So, the word we are using, 'un-banked', comes into play and is very powerful. It helps us destabilise the process from the beginning and this cascades down the organisation. By far, that is the toughest job. I keep calling myself the chief cultural officer; the rest of my work is done.
