'Our low NPAs mean we are playing smart, not safe'

Part I: 'E-economy is ruthless. You don't get a second chance'

Part II: 'In trying to be a one-stop financial services shop, we are not spreading ourselves thin'

Most of the new age private banks have comparatively low NPAs. But public sector banks feel you get more credit than is due for this, because you apparently play it safe by targeting high net worth, low-risk customers in urban areas.

Firstly, I think they (public sector banks) have a point.

It's not a question of playing it safe. We are trying to achieve a right balance between risk and reward.

The banking system in India is itself evolving from being a developmental set-up to a commercial set-up. So the largest, historical NPAs that the public sector banks have had are a consequence of nationalisation, when they were considered developmental agencies.

So the nationalised banks say, 'If you split our role into two between developmental and commercial functions, then our NPAs may not be so high.' True.

But we are not playing it safe. We are playing it in a manner that is commensurate with our shareholding needs. Risk and return must be linked. And if that is called playing safe, so be it.

If you give me a Hindustan Lever share and ask for a loan against it, I will charge you one rate. If you want a clean loan, I will charge you another rate. Is it called playing safe? Or is it called playing smart?

Assuming you are offered a top banking job with focus on rural India, do you think you would be as successful as you are here?

No, because the banking that is going on in the rural market today is developmental banking. That is why I said up-front that the people who run the public sector banks are very competent people. They have got multiple objectives.

What has been HDFC Bank's experience in Netbanking?

The customers have found it very convenient. As we introduce more and more products and features, the response is excellent. I was in Pune a week back. When I asked our branch people, what is the most popular product of our new offerings, they said it is Internet banking. Why? It is convenient.

So when you go and ask -- and I asked a few of the customers - they said, 'Through ATM and Internet banking, you have offered us the convenience of dealing with you (HDFC Bank) when we want and from where we want. And, if we have a problem, we've a branch nearby to come and solve the problem.' They are very happy with our service.

To popularise the product further, we have put demonstration facilities at all our branches. So people who are coming to banks can get to know how Internet banking works.

We are now revamping our service. It will be transformed in the next two to three months. At the first stage, we have put all the content and dealing capability that was required for a financial portal.

At the second stage, we want to make it very convenient to use. We don't want to exhaust people's patience. So, today, if you log in to the Net and visit our site, you can benefit from savings products, loan products, housing loans; bill payment service; advisories for deals in forex, money market, equities and mutual funds; news summary. One can also go to our affiliate site for shopping, or to our brokerage site for portfolio management or live quotes. So, effectively, this is as complete a financial portal as there can be.

Are there any patterns in the use of Netbanking?

People start off with the enquiry function. Then they move on to transaction. Advisory is very popular. Brokerage, going by what is happening in this segment, seems very popular too. We have also introduced demat enquiry service on the Net which is also very popular. (Direct demat is not yet allowed in India.)

But then, people complain of poor Net infrastructure, slow download speeds, doubtful electronic security systems and all that.

There again, they have a point. Today's issues are bandwidth, Internet connection pricing, access devices. If you see what is happening in the market today, I don't think any of the issues will remain in the next three to six months. If at least by that time, if we polish our products and reach the standards of financial portals overseas which we constantly look at, I think we would be sitting in clover, with all ten fingers in butter.

So, the Net explosion is yet to come. Is our foray a major earning activity today? No. Will it become one in future? Definitely. From where do earnings come? From new customers and reduction in costs.

How does it feel leading a bank that is looked up to as a role model by others?

There are four parts to this.

Firstly, we had a fantastic opportunity. We came in new. We were not saddled with baggage. Technology was changing. That is a very important part of our success.

Secondly, it would not have been possible unless we got the right manpower. What I am very happy with is that we were able to get people who believed in the vision that we can create a world class bank and had the ability to execute it.

We have people who had worked before at the Bank of America, Citibank, HongkongBank, Arthur Andersen, you name it. But each one has come in with a skill-set and a vision.

Thirdly, our customers have taken to our services very well.

Finally, we being in India, we had the grace of God.

So our only hope is that -- touchwood! -- the customer support will remain.

Are there any Indian banks that have impressed you with their practices or performance?

As far as the public sector banks are concerned, a lot of them have done a lot. If you see the transformation that has taken place in banks like the State Bank of India, Bank of Baroda, Corporation Bank, they have done a phenomenal job, except that they have gargantuan tasks. They have come up the technology ladder, they have come up with products, they are customer focused... they have done a lot of things. If they carry on like this, they will be formidable competitors going forward.

Then you have the old private sector banks. These will face difficulties because they need money. And they carry a certain legacy. They will have to work hard and restructure their operations.

Then you have the new private sector banks. ICICI as a group has done a tremendous job in transforming itself from a financial institution to a one-stop financial services shop, under the able guidance of its CEO (K V Kamath).

Part IV: 'A debit card is really more appropriate for the Indian psyche'

Part V: 'Banking regulations in India are not as restrictive as people make them out to be'

Interviews

Money

Tell us what you think of this interview