Women of the 21st Century: Says Chanda Kochhar: ‘We have to tread carefully in current environment’

CHANDA Kochhar, who took over as MD and CEO of ICICI Bank on Monday, is emphatic about a course correction for the bank. It is not change for the sake of change, but a response to the new environment. In a way it is about going back to the basics of banking by opening more branches to raise more deposits and increasing transaction banking to ensure recurring fee income. In an interview with ET NOW's Shaji Vikraman & Mayur Shetty, Ms Kochhar speaks of her plans for the bank.

You have said ICICI Bank is unlikely to grow this year. This is surprising considering you are the country's second-largest lender and bank credit is targeted to grow 20% this fiscal. Has there been any regulatory direction?
There is no regulatory direction. Growth has many dimensions. It is not that the organisation is not growing. We are going to set up almost 600 branches, which means a 40% growth in our branch network. We have said that we will grow current and savings account deposits by 25%, which is faster than the deposit growth rate for the industry. We are also growing our transaction banking business. While there is a lot of growth, much of this may not translate into balance sheet growth. In transaction banking, for instance, a large part is not fund-based. Similarly, while we will grow mortgages and car loans, we are not disbursing short-term personal loans and unsecured loans.
Does the emphases on retail deposits and transaction banking mean it's back to basics for the bank?
Probably yes. The current environment is such that even corporate customers are concentrating on ensuring that businesses run and reach a more stable phase before they jump into infrastructure investment or put a lot of money into new projects. That is the mood of the current environment and we have to adapt our strategy accordingly.
How are you reworking your strategy?
The environment demands you to increase your recurrent sources of income...which are transaction banking and net interest income. We could increase net interest income by using capital to grow loans... but given the environment we have to be cautious of risk and have to grow margins without using capital.
What about your international business?
Internationally, where we had high growth in the past, we will see very moderate growth. While the focus has not changed, the funding pattern has. On the funding side, there were three sources of funds — bonds, inter bank deposits and retail deposits. In the current environment, we do not want to depend on bonds because the rate is high and neither on inter bank because it is very volatile. We will depend on retail deposits. So, obviously growth is going to be calibrated and much more moderate.
Last year you initiated an investigation into those who were spreading rumours about the bank being in trouble. Has it reached any conclusion?
From our side we have taken the investigation to the logical conclusion. We have traced the origins to establish that there was a deliberate attempt to spread rumours. However, beyond that, it is for the law of the land to take it forward. I won't assign it to any rivals. In an environment like that people try to take opportunity of volatile share movements.
That was the second time ICICI Bank had to bear the brunt of rumours. Why is it that ICICI Bank is so susceptible?
When you are ahead of others there is some scepticism in the minds of people till the strategies are proven. You ride the advantage of that and you also have to take on some challenges. I think there is a kind of privilege of being a leader, ahead of others. It takes time for people to understand the logic. When we went retail, people were skeptical whether the retail business was a good business and whether at all we would be able to implement it. Similarly, when we went international, we were the first to go there. I am sure many others would have wanted to follow in our footsteps. But before they could actually follow, the global environment changed.
ICICI has prided itself in being number one in various businesses. Are you willing to now give up that position?
The DNA of being number one is there but what is the priority for number one depends on the environment. This year we want to be the number one in current and savings accounts (CASA), in growing branch network, in productivity and cost control. In housing loans, beyond a certain point (of interest rates), it
    does not make economic
    sense to disburse.
    Will you continue to
    pursue plans for a holding company?
    The intermediate holding company structure (a subsidiary of the bank, which in turn becomes a holding company for its other subsidiaries) is something that we are not pursuing anymore. A few years from now I can visualise the industry moving to an apex holding company (single holding company for all businesses within a group) structure. In the meantime, we have the options of selling shares of the individual companies.
There is a perception that bad loans will rise in the next quarter...
If you look at a business like home loans or car loans the loss ratio continues to remains stable. As far as corporate business is concerned there may be some amount of restructuring that is still required for some companies. But, beyond that, I do not expect NPA surprises. On unsecured loans such as credit cards, losses are increasing, but we as a bank have reduced the portfolio substantially. So I think things should only get better from here.
Why is your appointment for a three-year tenure when the board had recommended five?
The Reserve Bank of India always clears our tenures for three years. This has been true in the past as well when we were appointed as executive directors. (At that time) RBI had cleared our term for three years.
Do you expect clarifications on the treatment of ICICI Bank's foreign shareholders under the new FDI norms?
I suppose they would because all the private sector banks had a type of ownership structure for many years and suddenly nothing has changed in their ownership structure. There is already an exception for insurance, so I am quite hopeful.
Now that you have taken over, how do you see the legacy factor?
You have to have a mix of both. As a leader you have to preserve the legacy and at the same time keep your organisation flexible enough to change if the environment requires. There are some very strong points of our legacy which I would make sure continues; we are a young, innovative organisation always ahead of others. At the same time, the current environment is such that we do need a mix of prudence. There is some part of strategy that would change but there is some basic DNA of the organisation that would continue.