‘We are not in the customer acquisition game’

You have made a smooth transition from bureaucracy to banking. What’s the key?

I inherited a very good team in the bank and merely played the role of a navigator. Primarily, I have done two things: I listened to a lot of people and handled risk on a portfolio basis. It was different from assessing risk on a product basis.

What changes have you brought in?

In the first two years, I spent a lot of time on debottlenecking and empowering people at various levels to take decisions. Simultaneously, we also focused on the IT architecture. Because of this, we could issue at par cheques to all our customers well ahead of any other bank. At the next stage, we tried to bring in competitiveness by reducing the cost of funds and realigning the yield on advances. We raised the kitty of demand deposits substantially to reduce the cost of funds and at the same time redesigned all our liability products keeping in mind different segments of customers. In the last two years, we have started looking at our market shares. We are No I in the debt syndication segment and are among the top five in cash management.

Future plans?

We will start wealth management services very soon. The second focus area is agriculture financing. We have 10 rural branches and will add many more in due course. We have 100 agriculture officers. We are already into corporate agricultural lending and contract farming relationships.

Going forward, there will be more focus on these areas along with SME financing. We will also launch our credit card in the last quarter of this financial year. We will also bring down the net NPA to less than 1 per cent by the end of the year.

No big retail push?

Well, retail assets account for about 30 per cent of our total assets and it will continue to be this way. We are not in the customer acquisition game. Capital must be used with great care and we do not want to wait for five years for pay-back on any product we launch. There is an upswing in the corporate credit cycle and I am not defensive about the corporate credit growth.

What went wrong in the proposed GTB-UTI Bank merger?

The decision was based on imperfect information and inadequate appreciation of issues. We do make mistakes. There are many success stories too...

Last December you offered to quit?

In modern day capitalism, the shareholders play a very important role. If the principal shareholders do not want you, you must quit...

What’s your outlook on UTI Bank over the next five years?

I have already explained what we want to do. I will not be around for five years. The board has given me a fresh five-year term as the CMD of the bank. However, I will step down in July 2007 when I turn 60.•

To Be The Best P J Nayak has used the cutting edge of technology and his people skills to catapult UTI Bank into the big league On January 1, 2000, when P Jayendra Nayak took over as chairman and managing director of UTI Bank, he was the 657th employee on the new generation private bank’s pay roll. Today the bank employs 5,200 executives and will add another 2,000 soon. Over the last five years, UTI Bank has shown a phenomenal growth in every aspect of business. On qualitative parameters, UTI Bank is way above competition. Its average return on equity (RoE) over the last five years is 28.54 per cent against HDFC Bank’s 21.12 per cent and ICICI Bank’s 16.52 per cent. In the public sector, Punjab National Bank’s average RoE over the last five years is 23.6 per cent and that of Oriental Bank of Commerce 22.48 per cent. Similarly, the five-year compounded average growth rate (CAGR) of UTI Bank’s net worth is 58.66 per cent against ICICI Bank’s 58.51 per cent, HDFC Bank’s 10.92 per cent and PNB’s 29.14 per cent. The five-year CAGR of its net interest income is 44.28 per cent and fee income 49.18 per cent. The five-year CAGR of UTI Bank’s net profit is 45.72 per cent; assets 41.44 per cent; advances 34.79 per cent; investment 46.46 per cent; total deposits 40.85 per cent and demand deposits 65.44 per cent – spectacular by any yardstick. So it’s hardly surprising that that the BS Banker of the Year Award goes to Nayak, the man at the centre of it all. To his credit, he has catapulted a small new private bank – which was for all practical purposes run like a public sector bank both in terms of ownership as well as work culture – into the big league. Today it is the biggest player in the loan syndication market and has the third largest ATM network among all banks in India. About 95 per cent of its retail cash transactions are carried through its 1565 ATMs across the country. The comparable figure for HDFC Bank and ICICI Bank could be around 70 per cent. Nayak had started focusing on the IT infrastructure even before he took over as CMD. UTI Bank insiders say he studied the banks’ financials for three weeks in December 1999, before stepping in as the boss and persuaded former chairman Supriya Gupta to opt for Infosys’ ‘Finnacle’ to run the centralised database of the bank. In fact, UTI Bank was the first Indian bank to go for `Finnacle’.It is also the first bank to have a private equity investor when Actis picked up a stake in it. Now, HSBC and Barclays – two of the world’s largest banks and both based in the UK – hold stakes in UTI Bank. Amid all the positive attributes, his banking career has one blemish: the failed merger of GTB with UTI Bank. The Joint Parliamentary Committee on the 2001 securities scam had asked UTI Bank to conduct an independent inquiry into the failed merger and even alleged that Nayak “stood to gain personally from the merger”. Nayak immediately went on leave requesting the bank’s board to conduct an inquiry. Last December too, he volunteered to quit when one of the promoters of the bank moved a proposal to split the CMD’s post into two. On both the occasions, he came out with flying colours with no mark against his reputation. He is one of the rare bureaucrats who resigned from the IAS to join the financial sector. He was part of the team in the finance ministry that implemented economic reforms in the early 1990s with Manmohan Singh and Montek Singh Ahluwalia. As joint secretary in charge of the capital market division, Nayak saw through the most tumultuous time of the scam-hit Indian stock markets. Those who have seen him from close quarters do not see any change in him following his shift from the North Block to the country’s commercial capital.   BIO BORN: July 5, 1947, in Chennai EDUCATION: MA and Ph.D in economics from Cambridge University, London CAREER: An IAS from the Karnataka cadre. Between 1990 and 1999, worked with the department of economic affairs, ministry of finance, overseeing capital markets and external commercial borrowings. Resigned from the IAS to take over as executive trustee of Unit Trust of India. Worked on the assignment between 1996 and 1999. Took over as chairman and managing director of UTI Bank in January 2000. As a bureaucrat he never sought any personal favour from any quarter. As UTI Bank chairman, every time he visits a bank branch, he pays for his lunch. When he does not have the money, a draft follows immediately.

Top	Business Standard • BANKING ANNUAL • November 2005