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| Edited By: Manju AB |Source: DNA |Updated: Dec 11, 2017, 06:15 AM IST
A big, dark-coloured globe rotates on a golden metallic axis, at the side of the table. Gifted by one of his customers, the globe stands a testimony to Gautam Thakur's aspiration to make Saraswat Bank a major bank with footprints all over India. The globe, though symbolic, sums up the growth philosophy of Saraswat - a bank with global practices and a local heart which just entered its centenary year on September 14, 2017.
In a freewheeling interview to Manju AB, Thakur, the chairman of India's biggest co-operative bank explains how important it is to help small businesses grow in size. Vijay Sales and Badve Engineering are but just a few that the bank nurtured at a time when commercial banks were unwilling to take risk.
The quality of decision making and governance is what insulates institutions from problems like NPAs. Of the total Rs 21,500 crore of advances, about Rs 1,000 crore are stressed assets; this includes the restructured as well, and NPAs mostly from corporate loans. These are the outcome of legacy issues from the time we used to give larger corporate loans of Rs 200 to Rs 250 crore as part of consortium lending. Now, we are very selective. It is not that we are not getting enquiries of Rs 100 crore- or Rs 200 crore-size loans. Our focus will be customers who require loans of Rs 1 crore and Rs 10 crore. During the year, we have added a thousand of those accounts. These are the businesses that will grow in future to be our wholesale banking clients. It is our responsibility to nurture these fledgling businesses.
Most of our 1.88 lakh shareholders are our borrowers as well. Our board members include chartered accountants, bankers and lawyers who give a multi-dimensional view to all decisions of the bank. Any borrower can meet the chairman of Saraswat Bank. Twelve weak co-operative banks were merged with Saraswat, thus, saving the money of over a million depositors in these banks. We were the first co-operative bank that got a pan-India license to open branches wherever we wanted. But, our decisions are always with the consensus of the board. We stay away from external influences in our decision making.
Shiva Sena had a practice of selecting intellectuals into their fold. My father was a good orator so he was elected on a Shiva Sena ticket. But the political connections never coloured the decisions at the bank. He was a probationary officer with State Bank of India (SBI). He left the bank to start the national school of banking to prepare children for the banking sector. Many of the alumni from the school work in leading banks. I have been running it for the last 20 years. So everything here is run on merit.
The corporate side is tempting, it helps us grow the book faster. But, I think it is more sensible to go on the retail side. On the wholesale loans, we would rather be safe than sorry. When the economy is growing, there is an irrational exuberance. Risks from corporate is going to be higher. The year-on-year growth in the retail book is 70%, so there was an opportunity in the downturn. We only need to tap it. The bank has a total advance of Rs 21,500 crore and Rs 33,700 crore in the deposits. About 65% of our advances are on the corporate side which will come down to less than 50% in the next three years.
That is true. So, we have revamped retail banking and have kept SBI as a benchmark. We match SBI's rate, our home loan rate is at 8.35%. We are called the SBI of the co-operative. So, whenever SBI revises its home loan rates, we try to match it. Moreover, on the fixed deposit side we reduce the rate while keeping it a few basis points higher than SBI.
Co-operative is in my DNA, in my blood. I can never shed it. Raising capital is a big issue with the co-operative banks. Saraswat Bank is in the co-operative field for 100 years. Only once my father had said he would like to leave the fold, but that was due to difficulties in raising capital. The book value of the bank's share is Rs 150, but when we give it to the shareholders we have to give it at a face value of Rs 10. So, it is a loss of Rs 140. If you see in the last year, we raised almost Rs 280 crore through long-term subordinated deposits. Capital is not a problem until and unless the Basell-III requirements are extended to us. But, we want to be in a state of preparedness.
Saraswat must have grown many small businesses.
Vijay Sales started off as a small 200-square feet shop in Mahim, about 50 years ago. Today, they have 66 huge stores all over India. Founder Nanu Gupta was a small businessman who used to close his shop and deposit the day's collection with branch manager who used to stay in Saraswat colony. Our branch manager would go the next day and deposit in the Saraswat branch below. That was the level of trust. Now, his second and third generation are all banking with us.
Shrikant Badve of Badve Engineering was another client we have nurtured. After completing his engineering when he wanted a loan to start a business, no bank took the risk. Saraswat gave him the support. Today, he is a wholesale customer whose business did not get impacted by the slowdown unlike other auto-component manufacturers. Badve Engineering is a Rs 4,000-crore networth company today with 20 factories all over India.
Yes, it is like a game of cricket. We are in the middle over where we have reached a balance-sheet size of Rs 55,000 crore. When my father passed away four years back, the balance-sheet size was Rs 39,000 crore. I was at that time driving the strategic direction of the bank, and in three years when I proved myself, I was elected unanimously as chairman. In the next five years, we will achieve our target. It is not as if you will grow according to the pace of the economy. We need to look for growth opportunities.
We are already seeing green shoots. We have enquiries from textiles, automobiles and engineering. Always take a timespan of three years and see the pattern of growth. The cycles of growth are different. The businesses are planned for the next cycle of growth which will come in the next few years. Right now, cement companies are the flavour of the stock market but cement consumption is all held up due to RERA and goods and services tax (GST). But, with the government's push for infrastructure, the next cycle of growth will start. The capacities will be build the sales cycles are different from the sale cycles
RERA is a big-ticket reform, it will revolutionise the way businesses are done. Strong big players would come. Smaller players in the real estate industry are getting more organised. Fly-by-night operators will be kept out. Building under construction will attract 12.5% GST, so only financially strong players will operate in the market reducing the risk for lenders and buyers. Units will be sold only when they are fully ready. Now, there is turmoil but it will settle down. Luxury apartment sales in south Mumbai are down. The excess capacity in commercial real estate is getting soaked up but retail capacities are lying around in the outskirts of Mumbai.
The Banking Codes and Standards Board did a survey of 51 banks which included private nationalised and six co-operative banks. We ranked first in customer service. We completely shut down our back office. I started my day at 8.30 every morning, our senior most officers were deployed at the branches. RBI helped us with currency. It was tough but we kept it as smooth as was possible.
We will not open more than five or 10 branches every year. We have a customer base of 30 lakh and of this, 17 lakh is using digital banking. Most of them are using debit cards but a bulk of them have started using mobile banking. During this calendar year, we will open 25 centers for business correspondents. When that is successful, I want to launch 50 business correspondents every year. If there is an overwhelming response in the business correspondent centre, we can think of putting the branch. This model will build efficiencies, increase market share without increasing costs.
