Shanti Ekambaram Curated
Group President, Kotak Mahindra Bank
CURATED BY :
What are your views on the Finance part of a business?
What happens when sales slow down?
How would you classify the "things" you would like to inculcate in your business?
Can you tell us some practical things that you would probably follow in your own business?
Can you give us an insight into your journey at Kotak Mahindra Bank
I took over as president of the consumer banking division at Kotak Mahindra Bank in April 2014. The division offers a bouquet of secured and unsecured loans to retail customers and small and medium enterprises to finance their working capital needs. While Kotak has been investing heavily in digital banking and has a large collection of apps, I believe that bank branches also need to grow. With the ongoing integration of ING Vyasa Bank, which Kotak acquired last year, about 1,400 branches will get added. I believe that physical infrastructure is key to customer acquisition, but a solid digital framework is a way ahead for servicing the needs of the customers. In the past year, I launched a number of apps, including Kotak Bharat, which allows customers to carry out 25 different transactions, including mobile recharge and small value transactions. Then there’s the Social Commerce app, which allows you to pay for books and movie tickets through Twitter; while KayPay allows for the transfer of funds to contacts on Facebook, Google, e-mail, or telephone. I have rich experience in capital markets, corporate banking, and treasury management, having served as the group head of wholesale banking. A chartered accountant by profession, I am a veteran at Kotak—I was the 26th hire in the company.
What else would you like to do as far as expanding your own presence in terms of payments bank?
What is Kotak's plan as far as engaging with that ecosystem of FinTech Startups is concerned?
How Kotak will tap into the FinTech opportunity and how are you currently working with startups in the space?
What are your learnings from the experience?
What will help you design and device products and experiences for the customers?
What is the view on the consolidation in the banking space? Any plans that Kotak would have for an acquisition of a smaller bank or an NBFC?
Like I have always said, we are always open if there is value and it is value accretive. I would just stop at that as far as that is concerned. We did a very large acquisition two-and-a-half years ago. We have digested that acquisition. It is growing well for us and wherever there is value, I Kotak would always be looking at that. As far as consolidation is concerned, I think it is imperative and it will happen. We saw what happened with the State Bank of India. I think you will see more PSU consolidation. The private sector, I think most of the players are growing and growing reasonably well in terms of opportunity, but at some stage, I think over the next two to five years, I would say that the sector will consolidate but I think prior to that it is very important to address a large amount of NPAs that are there in the system, to find some resolution to them and then you would probably see some, probably more consolidation in the industry.
So you are not seeing any asset quality concerns and suffice to say that the margins are looking healthy within the consumer finance segment?
In asset quality, we don’t see any signs of any worry. As far as margins are concerned, the consumer space has become highly competitive because of a lack of or sluggish credit demand in the wholesale space. So a lot of banks have sort of entered the retail space as well as banks NBFCs, etc. So margins will come down but I think ultimately our business model is about getting in the customer on the banking platform, cross-selling many products, savings, investments, assets and you have got to look at our customer at holistic space but certainly margins, there is high competition in that space.
I have to talk about the consumer finance business as well. Tell me how the book is for FY18? How is demand panning out post the note ban impact and which segments are showing most amount of pickup?
If you look at the consumer assets trend, consumption continuous to be reasonably robust. For example in the month of June you saw a large increase in durable space, in the car space, in the mortgage space, probably what you would call the pre-GST bump up. I think even post GST the trend continues. While housing the number of registrations were marginally dropped. So we are seeing actually robust growth across all the segments which includes home loans, which includes credit cards, which includes personal loans, which includes loan against property. We are seeing a reasonable amount of growth and consumption continues to remain reasonably strong at individual end. The businesses are picking up and coming out post GST i.e. small businesses and maybe really the small end of the businesses because I think many of them destocked in anticipation of GST. So we are seeing that business cycle come up. I think that will take place over the next few months, but we certainly have seen demand return and the consumption continues to remain robust.
What percentage of your deposits are in the bucket of Rs 1 crore to Rs 5 crores?
So we said 99.9% our customers are below one crores. So you would assume that the significant portion of our deposits are below Rs 1 crore. We also have deposits above Rs 1 crore but that there are more institutional as well as the high net worth individuals but I would rather sort of talk about our number of customers which are about almost 99.9% below the Rs 1 crore mark.
You have retained the 6% savings rate but cut the rates by 50 bps to 5.5% in the bucket of Rs 1 cr to Rs 5 cr. How do you see this impacting your cost of funds?
Firstly, let us just get back and look at the rationale. The rationale is we see a large opportunity in the retail franchise which we have been growing for the last four years, five years ever since liberalization. And post-demonetization we have seen a significant amount of money moving into the financial sector, savings, investment, insurance, etc. So our belief is that the large base of customers, almost 99.9% of our customers are below the Rs 1 crore mark is something that we would like to continue to build and hence we have retained the rate there because there is still headroom if you look at the one-year deposit rate of almost 675-690 by many banks. Now if you look at the above one crore, actually aligning closer to the market rates and money market rates which as you know have been coming down significantly. So for us, I would say that this is a trend more aimed at building the franchise rather than just looking at the cost of funds. Maybe it would move a bit but the aim is more at building a franchise and continuing to build franchise at all the customers' segments that we currently have.