 "Banks are not family businesses: Rana Kapoor")
India’s youngest private sector lender, YES Bank, has steadily grown since inception in 2004 but has of late been in the news for other reasons. Rana Kapoor, its managing director and chief executive officer, also president of business chamber Assocham, says he’s confident, though, the feud with late co-founder Ashok Kapur’s wife, Madhu Kapur, would not affect the institution. In an interview with Vrishti Beniwal, he discusses plans for the bank. Edited excerpts:
How are you bracing for competition from the (proposed) new private sector banks?
When we started 10 years ago, the top three private banks were about the same age we are today. I don’t think we made an iota of difference to them. We have a reason to believe a new bank, whether conversion of a non-bank finance company or a new one, would take at least 10 years to build a distinct identity or even market share. We have grown at a compounded annual rate of 35-36 per cent and even then we are not one per cent of the market. The competition for us is established large banks.
Would you look at acquisition for faster growth?
Our model for the past 10 years has been to grow organically because it gives us quality filters. Most of all, we can distill the HR. The real strength of any bank comes from its people. Also, infrastructure and risk culture are critical issues in institution building. When you put these factors on the radar, you can compromise a little bit on the growth. Fundamentally, any merger or acquisition is difficult. If there is an opportunity to acquire portfolios, if somebody is divesting the SME (small and medium enterprises) business or retail business or areas we are interested in growing, that would be of interest to us.
Would you look at raising capital for funding the expansion?
We do have enabling approvals from all the authorities concerned to raise $500 million but are going to wait for the atmospherics to improve, for the India story to resonate more in global markets, as a significant part of our capital comes from across international borders. We will probably use the opportunity in the second half of financial year 2014-15.
Where do you see yourself in the retail banking segment?
With a brand like YES Bank, we are destined to be a retail bank. By 2020, it will be distinctively our second biggest business and after that, it should become our number one business.
The bank had announced Version 2.0 in 2010. Are you on track towards achieving the goals?
Our objective in establishing Version 2.0 was that we should take the next jump to a medium-size bank, with total assets of Rs 1 lakh crore. We achieved that in 2013. Some sacrifices we have made on the growth side because preservation of asset quality and optimisation of capital have been incremental objectives during this phase. Today, we have 550 branches, 1,150 ATMs and 9,000 employees. By 2015, most of our objectives will be met. There will be a Version 3.0, to start in April 2015.
The Bombay High Court has admitted Madhu Kapur’s plea, challenging nomination of three directors on the bank’s board. What will be your course of action?
We will come back with our strategy. Since the matter is sub judice, I can’t comment on that. But since your question is based on a perception, let me tell you if a bank is upholding its professional stature, it is not negative. Shareholders and board members don’t think like that. Banks are managed by boards and they are not family businesses. Second, our bank has a certain institutional character, best defined by our HR (personnel) philosophy. Anything which affects the character of the bank has to naturally be defended and protected by the board. It is a very eminent board and has shown the best report card by any private sector bank in the first 10 years.
Don’t you think the dispute will affect the bank and its investors?
Not at all. We are on the receiving end.
As the economy is facing a slowdown and there is political uncertainty, do you see any downside risks to your growth?
The bulk of the downside which was there in the atmospherics over the past two years is at a turning point and irrespective of the political outcome, the economy is on a mend. It is not on a fast growth trajectory but even at the current momentum, it will find over six per cent (annual) growth because some of the deeper concerns regarding the current account deficit, trade deficit and discipline in fiscal management are somewhat in control. If there is a decisive government, it will help. De-bottlenecking and fast-tracking of infrastructure projects, and creating jobs can have a huge multiplier.
What will be your focus areas in future?
Our focus continues to be sunrise sectors. We like sectors that have shown resilience. Some of the sunrise sectors where we had fairly sustained growth are the food and agriculture business, life sciences and health care. We have added tourism and hospitality because it has tremendous potential. We have broad-based our model to include education and urban infrastructure. Renewable energy continues to be a huge focus area. Media & entertainment is also a good growth segment.
What action do you expect from the Reserve Bank in its annual monetary policy (review, on Monday)?
You will probably see status quo, although there are good indicators of inflation softening. But after that, we see at least a 50 basis points downward adjustment in interest rates in the new financial year.
How are you bracing for competition from the (proposed) new private sector banks?
When we started 10 years ago, the top three private banks were about the same age we are today. I don’t think we made an iota of difference to them. We have a reason to believe a new bank, whether conversion of a non-bank finance company or a new one, would take at least 10 years to build a distinct identity or even market share. We have grown at a compounded annual rate of 35-36 per cent and even then we are not one per cent of the market. The competition for us is established large banks.
Would you look at acquisition for faster growth?
Our model for the past 10 years has been to grow organically because it gives us quality filters. Most of all, we can distill the HR. The real strength of any bank comes from its people. Also, infrastructure and risk culture are critical issues in institution building. When you put these factors on the radar, you can compromise a little bit on the growth. Fundamentally, any merger or acquisition is difficult. If there is an opportunity to acquire portfolios, if somebody is divesting the SME (small and medium enterprises) business or retail business or areas we are interested in growing, that would be of interest to us.
Would you look at raising capital for funding the expansion?
We do have enabling approvals from all the authorities concerned to raise $500 million but are going to wait for the atmospherics to improve, for the India story to resonate more in global markets, as a significant part of our capital comes from across international borders. We will probably use the opportunity in the second half of financial year 2014-15.
Where do you see yourself in the retail banking segment?
With a brand like YES Bank, we are destined to be a retail bank. By 2020, it will be distinctively our second biggest business and after that, it should become our number one business.
The bank had announced Version 2.0 in 2010. Are you on track towards achieving the goals?
Our objective in establishing Version 2.0 was that we should take the next jump to a medium-size bank, with total assets of Rs 1 lakh crore. We achieved that in 2013. Some sacrifices we have made on the growth side because preservation of asset quality and optimisation of capital have been incremental objectives during this phase. Today, we have 550 branches, 1,150 ATMs and 9,000 employees. By 2015, most of our objectives will be met. There will be a Version 3.0, to start in April 2015.
The Bombay High Court has admitted Madhu Kapur’s plea, challenging nomination of three directors on the bank’s board. What will be your course of action?
We will come back with our strategy. Since the matter is sub judice, I can’t comment on that. But since your question is based on a perception, let me tell you if a bank is upholding its professional stature, it is not negative. Shareholders and board members don’t think like that. Banks are managed by boards and they are not family businesses. Second, our bank has a certain institutional character, best defined by our HR (personnel) philosophy. Anything which affects the character of the bank has to naturally be defended and protected by the board. It is a very eminent board and has shown the best report card by any private sector bank in the first 10 years.
Don’t you think the dispute will affect the bank and its investors?
Not at all. We are on the receiving end.
As the economy is facing a slowdown and there is political uncertainty, do you see any downside risks to your growth?
The bulk of the downside which was there in the atmospherics over the past two years is at a turning point and irrespective of the political outcome, the economy is on a mend. It is not on a fast growth trajectory but even at the current momentum, it will find over six per cent (annual) growth because some of the deeper concerns regarding the current account deficit, trade deficit and discipline in fiscal management are somewhat in control. If there is a decisive government, it will help. De-bottlenecking and fast-tracking of infrastructure projects, and creating jobs can have a huge multiplier.
What will be your focus areas in future?
Our focus continues to be sunrise sectors. We like sectors that have shown resilience. Some of the sunrise sectors where we had fairly sustained growth are the food and agriculture business, life sciences and health care. We have added tourism and hospitality because it has tremendous potential. We have broad-based our model to include education and urban infrastructure. Renewable energy continues to be a huge focus area. Media & entertainment is also a good growth segment.
What action do you expect from the Reserve Bank in its annual monetary policy (review, on Monday)?
You will probably see status quo, although there are good indicators of inflation softening. But after that, we see at least a 50 basis points downward adjustment in interest rates in the new financial year.