'As the team builds, each of them will bring in a different perspective, new thinking.'
Rajiv Anand took charge as the managing director and chief executive officer of IndusInd Bank in August after his predecessor quit following accounting lapses.
In a telephonic interaction with Manojit Saha/Business Standard, Anand spells out the road map to rebuild the private lender over the next three years.
Loans and deposits have fallen in Q2, both sequentially and year-on-year. Was that a conscious strategy?
It was a conscious call to shed some of our high-cost deposits and low-yielding assets. So, it is a rebalancing of the portfolio that is currently playing out.
If you notice, retail deposits have remained stable.
Our intent is to gradually replace higher-cost deposits with a larger share of Casa (Current Account and Savings Account) and retail deposits.
Casa is stable at around 31 per cent of total deposits.
The Casa ratio is lower than that of peers. How do you plan to improve the share?
There are multiple strategies to shore up our current and savings account balances. Firstly, we are not opening enough current accounts, and we need to improve team productivity.
Secondly, our salary account franchise is relatively weak, and that is something we are addressing.
We have traditionally had a very strong senior citizens' franchise, and we intend to build on that strength.
There is also work to be done in terms of operational efficiency and processes, which I am sure will enhance branch productivity.
Finally, we continue to invest in our digital capabilities, which will help us engage more effectively with existing customers.
Will this rebalancing of both the loan and deposit book continue for a few quarters?
The intent, of course, is to grow on a quarter-on-quarter (Q-o-Q) basis. The way I see it, this is a three-year journey.
Year one is about bringing growth back to industry levels; the second is about growing faster than the industry; and the third year will be about dominating in some of our focus sectors.
The important thing to understand is that, from an Indian economy perspective, there is enough growth.
Given our relatively low market share, growth is not the issue. But before that, putting your house in order is very, very important.
What are the gaps you have identified, and how do you plan to plug them?
The most important gap I find is talent. We have begun addressing that.
A new chief financial officer has joined us, along with new heads of internal audit, marketing, and business transformation.
Our operations and processes also need improvement. The new head of business transformation will address that.
Some of the senior management members in the organisation are retiring over the next six to nine months.
Therefore, it is important for us to fill those gaps as well.
So, the primary focus is to rebuild the senior management team over the next six months.
As this team builds, each of them will bring in a different perspective, new thinking.
Collectively, the intent will be to make a better bank in the future.
You also need another whole-time director on the board since you are currently the only one. The RBI requires at least two.
Correct. We will plug that gap as soon as possible.
What are the gaps on the business front?
The bank has traditionally been very strong in vehicle finance and gems and jewellery, and it has a large microfinance business. We will continue to grow in these areas.
There are two areas that we want to build. One is micro, small, and medium enterprises (MSMEs). Our relative positioning is still very small.
I believe the MSME space is a huge opportunity in the Indian context. I intend to invest in that and participate in that opportunity over the next decade.
The second is retail assets. Our traditional retail asset businesses are largely subscale, which gives us a huge opportunity to grow profitably while also supporting our liability franchise.
IndusInd Bank has been reducing its microfinance portfolio, which is now 7 per cent of the loan book. Will you reduce it further?
One has to understand that the microfinance business has traditionally been volatile. We are currently evaluating what is the correct proportionality of microfinance for us.
It will continue to be an important part of our portfolio. Because from a return on equity (ROE) perspective as well, it is attractive.
Most importantly, it provides us priority-sector lending (PSL) compliance.
But we don't intend to return to the proportions of 10-12 per cent that we earlier had. Where exactly we will settle is something we are working on.
Will you also expand the credit card book? It has contracted in the past few quarters. Private peers have been aggressive in this segment.
As far as the credit card business is concerned, the bank has built a reasonably strong franchise, and we can continue to grow that business.
The focus will be on serving existing clients of the bank. IndusInd has always been known for innovation.
I'm sure you remember the innovation of having any number as your account number, for example.
Therefore, we will use our innovation muscle to be able to strengthen our credit card business as well.
The retail-corporate mix in the loan book is 60:40. Will this change going forward?
Broadly speaking, 60-40 ratio is where we want to be, though we may go up and down 5 percentage points. Ultimately, it is where we are able to optimise ROE as we go forward.
On the asset quality front, there was around Rs 2,500 crore writeoff in Q2. How long will the pain continue?
Most of the writeoffs were in the microfinance segment. Our provision coverage ratio has also gone from 70 to 72 per cent as well.
Therefore, we will need to balance out the provisions that we have in a relative to loss given default. It's a continuous evaluation process.
Is the worst over for the microfinance business, or do you expect more pain?
We expect slippages in the microfinance business to start improving from Q4.
Apart from microfinance, are there any other portfolios where asset quality is a concern?
Other portfolios currently running from a credit quality perspective are broadly stable on a Q-o-Q basis.
You took charge at a time when things were not looking good. What was your initial assessment of the bank and its potential?
There are many white spaces within the bank, such as MSME, retail assets, and rural banking, that we can build out. The size of the opportunity here is tremendous.
We have over 3,000 branches, a very strong capital position, a large multi-segmental customer base, and a brand that has weathered the storm.
I think it is a very good starting position for us to be able to capture the opportunities that India will be able to provide.
Where do you see the bank three years from now?
I really want this to be a bank that all our stakeholders, such as investors, regulators, customers, and employees, see as a trusted institution, one they can be proud of in three years.
Any fundraising plans for the current financial year?
Our capital situation is very strong. The capital adequacy ratio is 17.1 per cent, up from 16.63 per cent on June 30. Therefore, we have no plans to raise equity at this point.
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