‘Indian Banks Robust People’s
Money Safe’

Chanda Kochhar, ICICI bank’s joint managing director and the bank’s new CEO, firmly believes that Indian banks and the money of people is much safer as compared to their counterparts around the world. A firm believer in the Indian banking industry, Chanda says, “The fundamentals of the Indian economy will continue to drive its growth for a long period.

In an exclusive interview to this correspondent at the 13th Wharton India Economic Forum, Chanda answered questions ranging from the safety of people’s money, competition from foreign banks and customer relations:

Excerpts from the interview: How do you see the Indian banking industry five year down the line?

CK: The Indian banking is a very robust industry. The lending standard has been strict as a result of which there is no toxic acid. Lending by Indian banks is done after looking at the ability of an individual to pay back the loan. Capital adequacy of Indian banks is much better as compared to other banks around the world…Indian banks have to deploy 30 percent of their assets in government securities, which make them very secure. Challenges could come for India, or for the bank, so I will break this up into two.

As far as India is concerned, we are watching very closely whether the current world economic scenario will impact India and by how much…So while I would not say India will remain totally insulated, I will say India’s resilience is much higher than many other Asian economies. The fundamentals of the Indian economy will continue to drive its growth for a long period.

In the third quarter of 2007, retail advances seem to be slowing down. As you look now at 2008, how does the year ahead look in light of the world economies hitting a speed bump or worse?

CK: Let me put India in perspective. In the last five to seven years, India has grown on the basis of its knowledge economy and consumerism. The IT industry and its related industries provided jobs for Indians. As Indians earned more, they spent more and that’s how consumerism drove economic growth as a whole and led to a huge growth in the retail-credit and consumer-credit business in India…People are now investing in manufacturing capacities and infrastructure. I estimate the Indian corporate sector has plans today to invest about $700 billion in manufacturing and infrastructure, which will be spent over the next three years. The next wave of growth for India is going to come out of capital investment. While growth for the retail and consumer industry is going to be between 10% and 15%, the growth in corporate lending will accelerate and be between 30% and 40%. In the last four or five years, the growth was essentially driven by consumer credit. Now the growth is going to be driven more by investment cycles and corporate credit.

What role do you foresee of the bank in modern India?

CK: Indian banking industry is very health industry as compared to other banks around the globe. The banks will have to play a very, very big role in the growth of the nation. It will have to grow much more within and as the Foreign Direct Investment dries up the Indian bank will have to play a bigger role.

How much of a problem will there be with the foreign banks coming to India and what challenges it will pose to Indian bank?

CK: Foreign bank are in India for decades. There is Citibank and then the HSBC is there. They have grown and allowed to set up nonbanking branches. They are however not allowed to buy Indian banks. Nothing wrong in their being there. With more foreign banks means more competition and challenges. This will allow Indian banks to be more competitive, use better technology and be more consumer friendly so as to pose a challenge to the foreign bank It is said that Indian banks are not customer friendly as foreign bank. How do you see that? CK: Take the new generation bank in private sector I think they have grown in 10 years mainly due to technology and are more customer friendly. But what about the Nationalized bank? CK: Every customer has to make their choice, the regulations on all of us are similar. It is for the people to make their choice, which service they like which is more close to them. What new products the private sector bank has to offer to the people coming to India and going out of India? CK: The best service a private sector bank will offer to the people of Indian origin is the facility to remit money in the most efficient way. At the ICICI we have large technology usage to transfer money and remit the money to the customer’s family. We do this at a much lesser cost and this is value added service. There are low cost channels which are more time consuming and sometimes unsafe. Our technology is time bound and safe

Do you keep a tab of who sends money to whom? And are security checks done of where the money is coming from?

CK: Yes indeed. We find out where the money originates and where it goes. There are strict internal checks and this is done in such a way that they are not intrusion to the customer or hamper their transaction.

How do you inform the world that the Indian bureaucracy, Indian banks and infrastructure are not that bad?

CK: People have to see the results. India needs to go out and keep talking. We have to improve our style. In western world the banks have been the starting points of all trouble while in India the banks are ticking. So far as infrastructure is concerned I can say that we could have done more but that does not mean that we have not done anything.

People are losing faith in the banking sector as banks are going down the drain. How safe are Indian banks?

CK: Our banking structure is different from western side hence our banks are safer.

So people’s money is more safe?

CK: I do not want to draw a comparison. But I can say that the Indian banks are safe and so is the money.

BY SUDHIR VYAS