Having completed six months as the head of India’s second largest bank, Chanda Kochhar, MD and CEO, ICICI Bank, spoke to Hindustan Times about her tenure and the challenges ahead for the banking sector. Excerpts.
How challenging has your tenure been so far?
It has been very exciting. I am happy to look back and see that our progress on the strategy that we started with, has been faster than expected. The current and savings account (Casa) ratio has reached 36 per cent from 28 per cent. Also while we have reduced our NPAs, our operating expenses have come down.
What has been the driver for the reduced NPAs?
The economic recovery has helped. Also we changed our lending parameters and the process of collection, which helped.
How did you manage to bring back the depositors who were moving toward the public sector banks (PSBs)?
Last year there was fear in the minds of people, but there is more clarity now and people are deciding more on the basis of facts. We communicated intensively with our customers and investors to clarify facts.
Is your stock market performance reflecting that?
I think so. We met our investors and spent time explaining them about our strategy. There is good amount of satisfaction about the progress we have made in implementing those strategies. While they will keep watching us for what we plan to achieve, there has been good buying.
The RBI has hinted at exiting the stimulus. Do you see a policy rate hike in the next review?
RBI’s exit policy has not been destabilising and disruptive... it is a balanced approach. Clearly exit would take place but the approach would be a managed one.
Credit growth doesn’t seem to have picked up enough?
The credit offtake till now has not been big but that does not mean that economic activity is not happening. Individuals are buying homes... home registrations have gone up 50 per cent since January. Corporates are looking to restart project investments. While the disbursements may take a little time, I think it will reflect in the Q4 of this year and Q1 of the next fiscal. I think we will enter the next fiscal with a credit growth clearly above 20 per cent.
Do you see rates going up?
As the credit offtake moves up, I think an impact on liquidity will see some rise in rates towards the end of this fiscal.
But banks don’t reduce rates when policy rates fall, in the same manner that they raise rates when tightening happens.
Rates are a factor of cost of funds and we raise and reduce the rates on the same lines.
But the customer doesn’t understand that. Why don’t you link your rate movements to an external benchmark such as Mumbai Inter Bank Offer Rate (Mibor) so there is more transparency?
That is the ideal situation as it makes things clearer to customers and even easier for banks to explain. But for that the financial markets will have to deepen. There is very little buying and trading of papers in India and as of now there are very few funds of banks that are linked to Mibor.
What needs to be done?
We need to have a meaningful Mibor which will get established if more papers get traded. Policy measures will also be required. Guidelines on Repo of corporate bonds that has happened after five years is a good move.
You have been reducing exposure to unsecured debt?
The risk there is high as it gets the least priority in repayment. Only once the Cibil gets stronger and customers understand their final track record will an impact their next borrowing, will they get more prudent. I think it will still take a few more years.
You have yet to open over 500 branches this year. How many will you be hiring?
The increase in employee base would not be proportionate to the number of branches... however it will still be in thousands. I think next year we won’t have surplus to start with... then hiring would be in line with the number of branches we set up.