The founder of India’s youngest bank on what it takes to start and survive in the banking business in the country
India Inc’s powerful men appear to have developed a special fondness for big cats. If Mukesh Ambani is fond of the leopard’s sharp predatory instincts, Rana Kapoor swears by the cheetah’s agility. But the Yes Bank founder and CEO is no copycat, write Shyamal Majumdar and Somasroy Chakraborty.
Kapoor, 53, told us about his fascination for the cheetah much before India’s richest industrialist went public (in an interview to an economic daily) about his obsession with the leopard. In fact, replicas of a cheetah sculpture that a colleague brought from South Africa have been adorning the tables of Yes Bank’s top 100 executives for the last two years. They are meant to act – or so the bank’s boss hopes – as a constant reminder of the need to grow ahead of others.
“We believe in seizing the opportunity every day. The cheetah symbolises our internal agility. I thought the message had to be seen by our top guys so that they can believe it,” Kapoor tells us.
He ignores our question on whether the “message” could also cause many employees to believe Yes Bank’s fondness for a pressure cooker existence.
We are in a rather noisy corner of San-Qi on the ground floor of the Four Seasons Hotel in Mumbai — a venue Kapoor chose for the exotically named “sea bass set”, an assortment of rice and fish with steamed vegetables. “Try it, it’s really good,” he says. Since the rest of the menu is essentially Greek to us, we agree.
No leopard or cheetah would mind emulating the speed with which Kapoor orders and we quickly steer the conversation to new bank licences (the banking regulator and the finance ministry are considering the issue) and the experience of the founder of India’s youngest bank in dealing with the Reserve Bank of India (RBI) when its licence application was being appraised.
He replies instantly: “You need divine intervention to set up a bank in India!” Indeed, there was nothing remotely cheetah-like in the process he had to endure to procure a licence. “In our case, we applied for a licence in 1998. But when new guidelines were announced in 2001, we had to make a fresh application. In addition, an elaborate due diligence was done for about a year and a half,” Kapoor says, adding he doesn’t think it will be easier for aspirants this time either.
Instead of “divine intervention”, Kapoor says he is immensely grateful to the three-member committee headed by former RBI Governor I G Patel for having faith in the dreams of three professionals who didn’t have pockets as deep as the other aspirants.
In 1995, Kapoor, his brother-in-law Ashok Kapur and colleague Harkirat Singh made a proposal to a visiting team from Rabobank for two joint ventures: a non-banking financial company (NBFC) and a bank. Rabobank would control the NBFC and the three Indian partners would run the bank. The NBFC was set up in 1997, with the three Indian partners chipping in with equity capital of Rs 9 crore each. Kapoor had to contribute only Rs 40 lakh from his pocket, the rest of it was the joining bonus from Rabobank. In 2003, the three sold their stake for a cool $10 million each, generating the seed fund for the bank.
The food is served and we are glad that we had agreed to Kapoor’s suggestion; the baked fish is truly delicious. Kapoor is talking about how Rabobank was supposed to pick up 26 per cent in Yes, suddenly developed cold feet but finally agreed to honour its commitment after much persuasion.
But with Rabobank now deciding to open its own bank in India, how does he see the competition? Kapoor declines to comment specifically on Rabo, but says just as no Indian bank will be able to compete overseas with foreign banks for a very long time, no foreign bank will be able to compete with Indian banks.
The Yes Bank supremo, however, does not approve of the idea of allowing companies to open banks – one of the most hotly debated topics in the RBI discussion paper on new bank licences – saying banks should be standalone entities. “There is no country in the world where there is a successful model of a corporate running a bank without it resulting in a conflict of interest,” he points out. “Banks cannot afford the reputational risk of something going wrong in some part of an industrial house. At the end of the day, you are dealing with a very sensitive savings product.”
The Japanese experience with keiretsu, the Korean experience with chaebols, and the Indian experience before nationalisation are reminders of the pitfalls of commercial interests promoting banks. The recent concerns emanating from corporate governance issues exacerbate this discomfort, he says.
He believes the older private banks should be strengthened instead of allowing new players in. For instance – and he reels off the numbers extempore – the advances per branch of the old private banks (Rs 29.8 crore) are significantly lower than the industry aggregate (Rs 48.6 crore) and a third of the new private banks (Rs 91.8 crore). The deposit per branch ratio shows a similar pattern. The old private banks have not expanded nationally, which could have enabled them to provide banking services to a wider population base. They registered the lowest branch growth among banking groups at 10 per cent against 29 per cent for the industry between 2005 and 2010.
“In my judgement, these banks need to be galvanised without adding a lot of systemic risk. Any new bank you bring in will add to systemic risk,” Kapoor says.
“The fish is getting cold,” he reminds us, which was also a way of reminding himself to eat; he’s been talking non-stop since we got in.We shift to a lighter topic to give him time to eat. How did he choose Yes as the name for his bank? “We did not want to call it Kapoor ki hatti or Kapoor and Kapur (in reference to his late brother-in-law),” he jokes. “One of our board members suggested the name, which was validated through a qualitative survey,” he adds. Inevitably, people made cracks that the bank should have been called “No Bank” and so on because of the endless wait for the licence, but he is happy that the bank has landed on its feet. “We are hoping that by 2015 it will emerge as one of the top national brands,” he says with a triumphant grin.
The bank has just declared its ambitious Version 2.0 growth plan: by 2015, a compound annual growth rate in profits of 35 per cent, a balance sheet with Rs 1,25,000 crore in deposits, Rs 1,00,000 crore in loans, a net interest margin of 4 per cent and a return on equity of 22 to 24 per cent. He also plans to increase the number of branches to 750 from 250, and ATMs to 2,500, his capital adequacy at 19 per cent is already among the highest, and Yes Bank has an international credit rating that is equivalent to India’s sovereign rating.
Not bad going for a man who in his early years worked in an assembly plant, as a library assistant and a clerk to part-finance his management education fees at the Rutgers University. It was during a summer project in the late seventies at 399 Park Avenue, New York, the global headquarters of Citigroup, that Kapoor finally decided to pursue a career in banking.
Yes Bank, he says, is building a knowledge-driven culture in offbeat areas. For example, the bank is hiring the best people from agricultural universities and making them learn the language of the bank. One of its clients, for example, had a farm for a long time and gradually converted a part of it into a modern terminal market.
We also ask him about his succession plan, given that one of his three daughters has just joined the bank as a management trainee. Kapoor insists it’s a temporary role because she isn’t interested in hard-core banking. In any case, Kapoor says, he doesn’t see the role of a family member in the bank’s management at any point of time.
The lunch is over and the restaurant suddenly looks deserted. As his car – a blue BMW 5 Series sedan – waits at the porch, Kapoor says the Yes Bank assignment is no longer a job for him. “It has become a hobby. Even though the bank is fully institutionalised, to me it is like a son, the youngest baby in the family,” he says, adding that the bank’s employees are all part of his extended family.
As we see him off, we think Kapoor, a voracious reader, would do well to read the frequent suggestion in management books that “when the boss thinks you are family, run”. But going by its lower-than-industry attrition rate, Yes Bank’s employees obviously don’t mind reciprocating the chairman’s feelings.
