Times are changing at ICICI Bank. The days of rapid growth and the race for market share are things of the past. It is introspection time; the operating environment has changed. It is time to play safe. “Conserving capital and liquidity are priorities”, says Chanda Kochhar, the bank’s Managing Director and CEO. That’s not all. ICICI Bank has to work hard to keep its flock together. So, Kochhar’s task is cut out — she has to steer the bank through a period of churn. Excerpts from an interview with HNN:How do you manage legacy issues during a transition? Both N. Vaghul and K.V. Kamath created a core team, and thereby created competition. With a change in leadership, how do you keep the flock together?
Well, we have the privilege of having some outstanding leaders. And every leader creates a legacy. It is not a question of whether I can step into somebody else’s shoes, but whether I can walk in my own shoes or run in them with stability. I want the organisation to meet certain expectations and standards, and would rather concentrate on these instead of trying to compare. Of course, it is important for the new leader to preserve the legacy. And one of ICICI Bank’s legacies is bench-strength and talent, and it should be preserved. But then, continuity and change is the yin and yang of life, so there will be few changes at the organisation level. And we can use that time to restructure some of the businesses, which anyway we were thinking about. Out here, the talent pool is enormous and we can take these changes in our stride.
What kind of restructuring are you looking at?In the current environment, conserving capital and liquidity are priorities. Also, we plan to innovate and make some of the structures more efficient. For instance, we have relied a lot on wholesale and bulk deposits in the past. Now, while we have done very well in growing our CASA (current and savings accounts), and have done so substantially, we have also been taking on bulk deposits. As a result, our CASA ratio has never been very good. Now, in a falling interest-rate scenario, you could raise one-year bulk deposit and refinance it a year later at lower rates. But in volatile times, it is not the right thing to do. As we grow our CASA, we will repay our bulk deposits, and not borrow more bulk deposits to grow our balance sheet.
When you speak about restructuring, there are a whole lot of businesses — the bank, insurance, private equity...
No, I am not talking about restructuring businesses per se. Just that within these businesses, the focus has to be on what is relevant to the current environment. For example, deposits and loans. In the past, it was OK if the client did not pay for 90 days, and we used to follow up only after that. Now, you have to be in touch with the client from day one or actually day zero. And also be present when a client has the capability to pay, as in the current context there are so many priorities on the cash flow. If you don’t get your money on time, it could be used for something else.
Has the nature of your relationship with clients undergone a change in the current downturn?
Well, until last September, the needs of clients were much different. It was all about their next project and the one after that, and our ability to fund them. Right now, they are telling us that they first want to be sure of their own cash flows before thinking of a new project. Their concern now is will the lender be there with them to meet their current needs. My current year looks very different in terms of capital utilisation and profitability. There might be some difficulty in paying back the instalments, but that is not going to be my position every year. So, will the lender treat me a bit differently? And we at ICICI Bank are responding to the revised expectations. At this point, everybody’s working capital cycles have got elongated, and we are re-assessing their needs. In some cases, we have exempted them from paying instalments for a year on say, a five-year loan. And given them the option to repay it from next year.
Are there businesses that are a strict no-no for you?
Nothing of that sort but in businesses such as SMEs, we have a cluster approach. Suppose we look at the construction industry. There may have been some clusters that we have never entered. Now, let us talk of retail. Currently, we have completely banned small-ticket personal loans. Same goes for two-wheeler loans. We are doing this only for existing customers from our branches. Not for new customers as collections are an issue.
ICICI Bank has been very aggressive, but in case of a slowdown, what does it mean from the point of view of HR?
Clearly, you got to re-orient the mindset of people to the revised priorities. So that they get the rationale behind the changes. Take collections. It is more about prevention now. You have to be in touch before a default, not after. Same goes for the corporate side. You got to find out whether they will pay on the due date, or if some restructuring is needed. So, the leader has to spell out the priorities and reskill people accordingly. We always had a policy of aligning organisational performance where at the beginning of the year, a big exercise is undertaken to make our priorities clear.
ICICI Bank has had global ambitions. Where does all that stand now?
Our rapid growth has always left people wondering — will they succeed or not? So, if we manage to pull it off, it’s ok. But if the environment changes and something goes wrong, then... When we started retail 10 years ago, people were sceptical. If we had faltered, people would have said, you only know the corporate business. But we have managed to move ahead of others, even globally, setting up a substantial business arranging forex loans. Then the scenario changed, and we had to take the impact. And since all of this was new, people could not assess what was going wrong. And that compounded the problem with some saying that the entire UK book is gone. Does all this mean that we have to stop being innovative? Certainly not.
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