It’s almost a year since IDFC Bank began its operations. Rajiv Lall, Managing Director, talks to Nupur Anand on the journey till date. Edited excerpts:
Q: You’d set ambitious targets at the start on the retail (small depositor) front. Where do you stand?
A: We are acquiring around 20,000 customers a day and by end-March, we will have about 250,000 retail customers. This means all our distribution channels are working well — business correspondents (BCs), branches and digital channels. We are looking at doubling the number of BCs from 500 to 1,000 by end-March. And, we’re in the process of completing the acquisition of a micro finance entity, Grama Vidiyal, that will be converted into a corporate BC for us. This will give us another 1.2 million customers and another Rs 1,500 crore in the balance sheet.
So, by March 31, we should have more than 1.5 million retail customers, 70 branches and 1,400 points of presence. This would exceed the target, as we were planning to do about 200,000 own customers by March 2017.
Q: What has gone well for you and what are the challenges?
A: The pace of customer acquisition is, more or less, satisfactory. The pace at which we are launching retail products and our ability to absorb acquisitions has been a huge confidence booster. What could go better are two things. The pace of acquisition needs to get even better and we are looking at a strategy of radical partnering. That means how many different types of stakeholders we can have in that distribution channel. That is one thing that need to be better. And, there is another challenge, of tempering the pace of acquisition to coordination failure, within the organisation or outside, with other stakeholders. We haven’t got that to a science, yet.
A third area is that we need to be incrementally anticipating the need of our customers and not simply reacting to situations. For that, we need to build in-house capabilities more and reduce dependence on vendor reaction.
It has been a challenging year and was operationally hugely intensive. I’m happy with what we achieved, but we can’t afford to be satisfied for even a nano second.
Q: Meeting the priority sector lending (PSL) target was going to be a big challenge. A year later, where do you stand?
A: It has been a challenge and we have been focusing a lot on inorganic growth on the asset front to meet the PSL targets. Considering our balance sheet size, it will be impossible to meet the targets until we also acquire portfolios. But, whatever inorganic growth we pursue is retail in nature. By the end of the financial year, we will have a retail book (from small depositors) of Rs 16,000 crore, from zero the day we began operations. Of this, Rs 13,000 crore will be inorganic growth. That also means 20-25 per cent of our balance sheet will be retail.
Q: To acquire customers in rural areas, are you looking at more acquisitions?
A: Yes, we are definitely looking at more acquisitions and inorganic opportunities for adding to our customer base. So, we will certainly not be looking at niche platforms that are focused on high-end customers. Instead, we will look at platforms or companies that bring to us mass and mass-affluent customers.
Q: As you are well on track to achieve your one -year target on the retail front, have you set a mid-term target?
A: If we are heroically saying our ambition is to become a mass-retail bank, our internal goal is to have six million retail customers by March 2020. By then, 60 per cent of our advances should be outside large corporates. That includes retail, SME (small and medium enterprises), etc. We also aim to get to a Casa (current and savings account) share of 20-25 per cent, probably the toughest challenge.
Q: On the corporate front, the problem of NPAs (non-performing assets) hasn’t abated as quickly as the sector envisaged. How sticky is it still and how are you working to resolve it?
A: The resolution of stressed assets is clearly not happening as quickly one would like. In fact, on a bad day, I think it is even slower than our pessimistic projections. However, broadly, it is in line, as our expectations were very low. In our case, the share of the stressed portfolio is not going up but the share of these stressed portfolios becoming NPAs is increasing. So, we not able to write-back the excess provisioning we had.
So, on the legacy front, it has been a problem; we want to build out of it as soon as we can. That is why the focus on building the retail or SME book becomes even more important. Our plan has been to diversify out of large infrastructure (loans) and to also develop more stickier sources of revenue; both these plans are on track.
Overall, if we take corporate and retail, we had told the market that we would have made 10 per cent increase in our profit after tax as compared to last year. Now that we are halfway through the financial year, I can say with some confidence that we are on track for achieving that.
Source: Business Standard
Image Courtesy: livemint
