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IDBI Bank plans to focus on small towns

George Smith Alexander

IDBI Bank is targeting second and third-tier towns in the country before turning on to the metros. This is in contrast to other private sector banks, which have initially focused on the metros and then gone into smaller towns and cities.

IDBI Bank managing director Gunit Chadha said: "The bank wants to take a leadership position in the second and third-tier towns. We plan to increase the market share to at least 10 per cent in these towns. The metros are already over-banked. We can always come back to the metros after building up our share in the smaller towns."

The bank has presence in smaller towns such as Jodhpur, Jabalpur, Raipur, Bhilai and Indore.

M S Verma, the bank chairman, said: "The cost of acquisition in non-metros are comparatively lower than the bigger cities. Also in the smaller towns we have an advantage on the perception too. Competition in these towns is much lower as we don't have to compete with five-six banks to get a market share. In the last few months 40 per cent of our retail growth has been through one-third of the new branches in these towns."

The bank is present in 48 centres across the country and wants to increase it to 60 in this fiscal. It also plans to open regional processing centres instead of centralised processing centres such as other private sector banks. "This would help us to improve our customer service even though there will be a marginal increase in costs," said Chadha.

IDBI Bank also plans to go in for cost-cutting measures. It plans to slash its non-productive expenses by cutting unwarranted expenditure. The bank is going in for a renegotiation for its premises, which will help it save Rs 20 million per annum. It also plans fresh talks with all its vendors and suppliers to save Rs 20 million per annum and also renegotiate with its technology vendors to save Rs 50 million per annum.

The bank also plans to save Rs 7 million per annum through negotiations on its media-spending. "We plan to do small savings here and there as we believe this will help us in the long run," said Chadha.

The operating expenses of the bank compared with the total income had gone up to 59 per cent in the year from 43 per cent in the previous year. The bank plans to bring this down to 50 per cent in fiscal 2004.

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