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| 'My mandate is to grow the bank, but cautiously' | | Q&A: Murali M Natrajan, MD & CEO, Development Credit Bank |
| Sudeep Jain & Abhijit Lele / Mumbai May 14, 2009, 00:34 IST |
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 Over the last few months, there has been a spate of bad news from Development Credit Bank, promoted by the Aga Khan Fund for Economic Development (Akfed). First came the departure of the bank’s CEO Gautam Vir, followed by losses in the third quarter and a rating downgrade. To add to the woes, the Reserve Bank of India has decided against giving fresh branch licenses till promoter holding reduces. But late last month, there was finally some good news with Murali M Natrajan joining as the Managing Director and CEO. In an interview, the first since taking over his new responsibility, the former Standard Chartered executive tells Sudeep Jain and Abhijit Lele about the strategy that he will pursue. Excerpts:
What prompted you to move from a foreign bank to a small Indian bank which is not in the best of health at the moment?
I have been with foreign banks all my life, either by design or by accident. While global banks give you great training and fantastic exposure, you are part of a system. And if you want to make a real difference to something, it is hard to notice that difference. So I thought why not use my knowledge and experience in an environment where I can actually add value to the bank and to the customers. It just happened that, around the same time, the (DCB) board approached me. I found DCB in a challenging situation and I find that exciting.
What is the mandate given to you by the board?
Grow, but cautiously and sensibly. Because, given our size, we need to be cautious and sensible. We want to fix the problems and increase our efficiencies.
Which areas need immediate action?
There are many areas which are good about the bank, which has been in existence for 77 years, first as a co-operative bank and then as a commercial bank. There is the support of loyal customers in the retail, SME and corporate segments and there are a lot of executives who have remained committed to the bank. There is a huge level of resilience in facing problems.
It’s not easy for a bank of this size to be without a CEO for a few months. So, my first priority is to bring everyone together under a common purpose and a common goal. We had a problem with unsecured personal lending, as did other banks. We have already arrested the problem. But, in banking, the effects are only visible after a few months.
Two, in growing some of the segments, like personal lending, maybe our costs have gone up and we have to deal with the cost-income ratio. Three, I see opportunities in retail, SME and corporate (lending).
Will you have to make provisions similar to what were made in Q3?
We have adopted a conservative provisioning policy. We are providing more than we have to. We stopped giving out personal loans in August 2008, so it is a declining problem and not a growing problem. Then, the collection and recovery efforts have started showing results. In the past four months, I have seen month-on-month improvement.
These things don’t dramatically improve, so I am hoping that the next 12 months are a lot better than the previous 12 months.
How have the rating actions by Crisil and Fitch affected you?
It has impacted, in the sense that we won’t be able to raise CDs (certificates of deposit) from, say, mutual funds. But that has not impacted us in terms of liquidity. We are well-capitalised and liquid at the moment.
What about RBI’s reluctance to give you fresh branch licences citing the shareholding structure?
It is important to have a strong promoter and Akfed is a very strong promoter. We are in dialogue with RBI on this particular issue. We would obviously like new branch licenses but, in the current situation, it is not very important to get branch licences to expand. As part of tackling the cost-income challenge, I want to be ready for new branches which would take another six months.
What kind of course-correction are you looking at on the retail assets’ side?
Our term deposit generation is going well. On the assets side, our lending to customers in branch catchment areas is doing quite well, although it is a small portfolio. Through the course-correction, we want to do more secured lending, like home loans and also make more efficient use of capital.
How are you going to position yourself on the corporate business side?
We are going to focus on all three segments – retail, corporate and SME – and on both assets and liabilities. I am not going to skew the bank towards any business. Over time, we should be looking at an equal share for all three businesses, at least on the assets side. On the liabilities side, retail would skew the picture. Our Casa (current account-savings account) share is close to 30 per cent, which is pretty decent for a bank of our size. Our strategy is to focus on a chosen segment of corporates. We want to be among the top three to five bankers in the chosen segment. As compared with some of the large banks, we will not be able to offer some of the products that they offer. So we need to play to our strengths.
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