HDFC just received the award for being the most valued brand in India. Did you see it coming and how does it feel?
Did I expect this or not is a different story. But since 3-4 years when I have been doing interviews with you we did talk about how we went to semi urban and rural areas, we always said that we arguably are the premier brand. So when an outside agency said that we are number one, we thank them and secondly we wanted to project to our customers that we offer complete band of financial services without any difficulty and that we will deliver what they want in a fair and transparent manner at the right price. Everyone in the Bank is thrilled that what we do has been recognized. This encourages us to put in double efforts.
Do you feel the pressure to sustain, because reaching the top and remaining there is another?
We don't feel the pressure but instead we are happy that we have reached this stage because now the way ahead will be easy. The issue was breaking into areas which were important to the people. For instance, if you take semi urban and rural areas, 60% of India stays there. There we substitute money lenders and their new requirements as the economy improves. But in addition, we are a part of the community. Our products are available widely: we have taken advantage of the multiplicity of media distribution channels and customer segmentation. It has become very expensive to use normal channels, but it has given us the ability that we can give right product to the right customer in the right time. The combination of digital channels and brick and mortar has worked. For this, we have worked really hard. Now with this base and the recognition, next step is easier.
Many people in banking industry see you as a silent killer: what are the customer firendly initiatives that are in the pipeline?
We have segmented our customers, for the customers we have tried to figure out what he wants from our brand and how we can deliver. That means we need to have multiplicity of channels, fastest turn around time, most competitive price and reach into the interior. Last year we opened 1400 branches in semi urban and rural areas and also encouraged virtual banking through various mediums like cell phone, tablet,etc. In urban areas we have the largest product range. 'Abhi ache din aanewale hai' (Good days will come soon); as the GDP grows so will we.
There is divide in Banking industry between private players and PSU who are in doubt. Also, that customers confidence is diminishing suddenly. What is your take on the same and what is the ground reality?
Indian banking system is safe, secured and sound and there is a no systemic risk. Although high NPA (non performing assets or bad debts) level is a matter of concern. Out of that high NPA level, half of it is related to slowdown of the economy and policy paralysis. We need improvement in our credit appraisal and early recognition of NPA so that we do not have so many NPAs. And NPAs itself requires faster resolution.
Also according to the Nayak Committee report, we need to allow the people to deliver better for which they need to get the right salary, right people and right people on the board. I feel that there is enough liquidity at this point in time to meet all the credit needs. Major needs will come 12-18 months down the road because projects which are conceived now will need finance at that point in time, by which time the RBI and Finance ministry should be looking at solutions.
For PSU Banks, do we need to improve pay scales?
I think we need to improve the pay scale of both public as well as private players. Now you can't pay a chairman a salary that you paid him earlier and expect him to perform in a completely different level. So unless there is an incentive for performance things won't improve. There is a need to create such environment so that people perform better. So I agree totally that it is a must.
How do you feel with the banking industry facing charges personal favors, political interference, undue favors, frauds, etc in recent times?
This doesn't happen only in banking, it happens everywhere and I feel in banking it is more of an exception than the rule. We have to try to curb it as much as we can. In defence of my public sector colleagues, I would say I have been in the IBA for 20 years most of them are very competent and upright.
We need to have a combination of improving both and I think that's what the Nayak commitee has brought out: interefernce has to brought down in terms of the board or even maximum salary. If you want them to compete in the market then you have to allow them to deal with market forces. RBI and finance ministry is looking at it. I think one incident is being made too much of though there is always scope for improvement.
Can we say that by end of this fiscal credit demand will see improvement and on the lending side, are we looking at some sort of softening?
We have reached the bottom and we are improving. There has been a turn around and a slight uptick in the GDP growth rate. The fact that inflation has come within control other than food inflation shows that. I think we will be benefited by lower oil prices, so inflation should also come under control. According to me things are improving as the stock market has improved, existing projects are been unclogged, clear policies are being set out, plans on bigger problems of fiscal deficit, agriculture policy, attracting investment and FDI, creating employment has been specified. But to expect all of it to be in place so fast, I think is too much and it will be better if they have a clear understanding which they have. We will be somewhere around 5.3-5.5% this year in GDP and if policies are in place then medium-to-long term growth should be 7%.
Do you see rates coming down may be last quarter?
I think rates will come down by the end of this year. For this the RBI governor needs clear understanding on inflation and fiscal deficit. I don't think interest rate at this point of time will bring in a major turn around. Because rates for corporate borrowings, personal and car loans are down at this point of time and there is not much demand...so when it picks up RBI can always infuse liquidity by reducing SLR and CRR. So, I think we are in the right trajectory and dollar rupee is stable.
Modi government will finish its 100 days soon, what is your take on the steps taken so far ... are people reading too much into it and what is your take on the directional shift?
Directional shift is in the right direction and they have approached it in two ways; the low hanging fruits and longer term requirement. So whatever action they could take in the interim to make the bureaucracy working, is happening and at the same time secretaries of various departments will be presenting what they did in 100 days and you can see that a lot of work has gone into it. In fundametal contours, you see fiscal deficit, GST,Direct cash transfer, reduction of subsidies and divestment of public sector coupled with turn around in Public sector enterprises: all of this has been clearly specified. We need infrastructure and we need money for that, as well as clear plans to get environmental clearance. If you think of FDI,foreigners are far more positive than we are. We have to understand that each one has its trajectory whether it is interest rate or inflation or improvement of investment climate, but some of it has happened.
Tell us two steps which he can take which will further speed up the process?
I think he is already moving in a fast space. He has put a lot of emphasis on GST which we need sooner or later. In case of subsidies, financial inclusion plan will be announced in the end of month for direct benifit transfer, he has brought accountability in bureaucracy, which is visible to everyone. I think overall we are in the right direction. The proof of the pudding will be in eating, but he has a limited time because whatever he does he needs to do it before February, otherwise he will lose the honeymoon.
Financial inclusion has been empasised saying that each family should have insurance. What is your view on the same?
Insurance that is provided on the rupay card is being provied by NPCI not the government. They are saying financial inclusion should be in two steps, one is making sure benefits reach the concerned person as well as benefits which are given are used for productive purposes. Second is creating financial viability by ensuring that the entire environment around is such that a person gets water, electricity, road, finance and gets demand for his product. First part is what is being launched now and they have said that everybody should come at the same time: the district authorities, the bank, NPCI and then Aadhar. I strongly recommend whoever wants to open account please open it as it is for your benefit and you will get the subsidy. this can be done in 1 year or 3 days, depending on the response.
There are talks on foreign investments and their limits, do you see light at the end of the tunnel?
I am sure achche din aanewale hai. World depends on hope, till now ours is not rejected and it will be positive we hope.
What is your view on global economy, what is your birds eye view?
US will do well. They have turned the trajectory, their growth rate will be more than what was predicted. Europe still has to solve problem on the financial side, but it will still not have a negative growth. Japan depends on how their collaboration with India will turnaround even as China has slowed down. Concerns over ending of QE 2 is over done, whatever is done has been priced in and even if QE 2 ends you will see more money coming into India because US stock market has been priced on the basis of zero volatility. So I think a part of the world will do well, a part will struggle. India in this environment has a great chance because our problems and solutions are defined.