In banking circles, Ratnakar Bank is often referred to as the ‘NH4 Bank’ since a majority of its business comes from cities in and around the 1,235-km-long National Highway 4 that connects four of the 10 most populous cities in India.
While the Kolhapur-based private lender will continue to serve the local community of traders, small businessmen and farmers, it now aspires to become a pan-India player. The new management aims to keep the plan simple: build on legacy, achieve scale and enter new regions. “We are only trying to extend the boundaries of what has been built. We are very clear in our minds that we cannot make this bank a reflection of our previous organisations. We have consciously put those clothes behind us,” says Rajeev Ahuja, who earlier worked with Citi and currently heads the strategy and financial markets division at Ratnakar Bank.
The blueprint has been prepared in such a way that one business can leverage on the other to expand the client base.
For instance, the bank has been traditionally offering loans to farmers in Maharashtra and Karnataka, who used the loans to buy seeds. Building on this, the bank has developed a business relationship with a large sugar producer that runs mills in this region and employs the local farmers for supply of sugarcane.
“We offer the farmers loans to smoothen their cash flow mismatch and other banking products to include them in the financial ecosystem. We are also a banker to the sugar company. Hence, we have developed good relationships both at the company-level as well as with the farmers,” said Aseem Gandhi, head of agri business and financial inclusion group at Ratnakar Bank.
The bank has formed similar relationships with a few consumer goods companies, which have businesses in western Maharashtra and northern Karnataka, and their vendors and suppliers.
Besides expanding the corporate client base, the strategy has allowed the bank to meet its priority sector lending targets for two consecutive years now, a feat that many large private banks have failed to achieve.
The bank is designing its retail play along the similar lines. It aims to target small traders and businessmen, who have commercial banking relationship with the bank, to offer retail loans and liability products. “We view a branch as a retail shop. It should retail all our products and services. Our fundamental strategy on the consumer retail side is to capture customers around the branch’s catchment area. We cannot pretend to attract customers, who are not in our geography,” says Nitin Chopra, head of retail and consumer banking business at Ratnakar Bank.
The bank aims to double the number of branches to 200 by the end of March 2014, and plans to have a network of three ATMs per branch. The bank’s strategy of ‘NH4 to NH8’ has seen the lender open new branches in the hinterlands of National Highway 8.
This has also strengthened the corporate banking revenue with the National Capital Region now accounting for almost 30 per cent of the bank's wholesale banking business.
So far, the bank has predominantly been a working capital bank and it is unlikely to change anytime soon even though it is augmenting its corporate banking product portfolio. “Our future strategy is not going to be much different. It is just that there will be a little more focus,” says R Gurumurthy, head of corporate and institutional banking business at Ratnakar Bank.
The bank had made some attempts to grow its businesses in the past, but it failed to achieve scale outside agri and SME segments, primarily due to lack of capital.
The problem was addressed in February 2011, when the new management under Vishwavir Ahuja convinced a group of investors including Housing Development Finance Corporation (HDFC), Norwest Venture Partners and Cartica Capital to invest Rs 700 crore in the bank.
Investors’ confidence in the bank was immediately justified, as the lender closed the last financial year with a five-fold increase in net profit. The bank has already started using the money to expand the product suite, improve its customer reach, and build a technology platform to support the growth plans.
“I don’t believe that one can build a bank with a narrow focus. The environment will always have some implications on our business strategies. But for us, it is a long-term story. We are not here to build a bank in one or two years. Hence, we will recalibrate our strategies according to the market,” said Vishwavir Ahuja, managing director and CEO of Ratnakar Bank.