‘Lending rates likely to fall in Q1’

In the last couple of years, private sector lender Dhanlaxmi Bank has evolved from the phase of being known as a regional player in Kerala to a bank that now has a pan-India presence. This has been possible with the efforts of a leader like Amitabh Chaturvedi, the managing director and CEO of the bank, who joined in October 2008. In the years to come, the bank is eyeing to reach the level of the second largest lender, ICICI Bank. Chaturvedi shares his plans with DNA. Excerpts:

You have over 18 years of experience in various areas of finance, right from banking, asset management, investment banking, life insurance, broking and distribution. Do you think CEOs like you have an edge over those who have an experience only in banking?
Banking has changed; it is no more that old savings account and current account. Banking is much more modern, products are modern, technology is modern and banking is complex in structure. Banking also means various other financial services. If someone has experience in mutual funds, life insurance and has also done banking, he will definitely have an edge over others. Today, customers look at State Bank of India, ICICI Bank and HDFC Bank in multi-field, that way there is an advantage if you have a worked in other industries.

You have been with large groups like Reliance and ICICI in the past. How is it different working over here?
When I joined this organisation in October 2008, it was small. During ICICI days it was a development financial institution (DFI). The retail set up had just started. But when I left it was a very large conglomerate. Same is the case with Reliance also. When I started with Reliance Mutual Fund, it was a very small component of their financial services. But when I left, Reliance Capital the parent company was a big conglomerate. So it is a matter of time. This organisation will also be definitely at a level of Reliance and ICICI. We started well. This organisation had certain shortcomings. These include, the branding was more like a regional branding, the business model was only one state, the branch network was only one state and employees were union type employees, with closed mindset. There were also many operational bottlenecks. For example, earlier, to recruit a clerk, the bank had a policy that sub-committee of board of directors will interview that person and recruit him. You cannot grow an organisation if you have three board members sitting to interview a clerk. We have removed and overcome all the initial structural issue. Today, this bank is not branded a regional player. It is a pan-India bank. There is a young set of employees. Almost 67% of the employees are young, less than 35 years and have come from either a foreign bank or a private sector bank. The business model is also balanced — Kerala and non-Kerala.

So I think we have overcome all this. There was a great resistance from a young banker to join Dhanlaxmi Bank, because he felt it is an old bank. But now there is an excitement among newcomers to join us.

The bank is now set to move into the next phase, which is from the first gear to the fourth. The business volume will also increase and the next level of growth will be visible to all. The first phase, which I have seen as a working employee, outsiders have not seen. The next phase will be visible to stakeholders. We will be one of the largest banks in Kerala in 2013, and by 2016, we will be among the top five private sector banks in the country. In India, the time has come for banks to build size. If not, with the way globalisation is happening, new licences are coming and if you do not have a certain size, you will either be wiped off or nobody will consider you a serious player. We should have a `80,000-100,000 crore balance sheet by 2016. Currently it is between `10,000 crore and `11,000 crore . By that time we will be between eight to ten million customer and right now we have around 1.7 million customers. Earlier, this bank used to open around thirty accounts every day. Now we add around 800 accounts every day. Now my target is to take this to 2,000.

What is your view on interest rates?
In the last three months there has been credit growth. But the interest rate increase is also bothering many of the borrowers. I feel in two months, the rates will get realigned. I expect the Reserve Bank of India to maintain a status quo on the key policy rates in the January review of the monetary policy. I also expect liquidity to ease. I do not expect interest rates to go up after February and March. If that happens then there will be a problem on the credit offtake. If, in January, we do not see deposit rate increase, may be you will see the base rates coming down in April quarter. I expect deposit rates to come down after February. During this quarter, lending rates will not drop. I expect lending rates to fall in the first quarter of the next financial year.

You have entered into an agreement with Doha Bank for online remittance. Is this your first step towards eying a bank branch in Dubai?
Definitely yes. The current branch network is maximum in Kerala. Several Malayalis stay in the Middle-East. We already have a tie-up with nine exchange houses. Ten of our employees are based in Dubai, Sharjah and Abu Dhabi. They are at these exchange houses for the remittance business there. We thought if we have to enter Qatar, let us go one step ahead. One and a half year ago, no one knew about us, since we were a small bank.

But that has changed now, so we tied-up with Doha Bank and will have two of our employees based in that bank. They will do all the remittance business, housing loans, insurance and FCNR account. Today, we do not have the luxury of opening a representative office or a branch, because there is a capital requirement. But next years onwards we will be equipped. We will have to go to the RBI to take an approval, but at least we will be equipped. It definitely makes sense to start with Dubai and Abu Dhabi.