Citibanks Advances On India

Imagine you are a finance manager in a software start-up. You need funds to expand your operations and install modern communication systems. Money is hard to come by in these days of high interest rates and NPA-conscious bankers. Now imagine you call Citibank, lender only to blue-blooded Indian companies -- and actually swing a loan.

Unthinkable? In a few months, Citibank is hoping more customers in corporate India will think this way. This is part of the multi -- billion banks global business strategy to turn more pro-active in its asset-building and widen its customer base in one of the worlds fastest-growing emerging markets. To this end, beginning this year, the countrys largest foreign bank, is altering its lending strategy from a geographical to an industry-wide approach.

Seven industry groups, which it calls sunrise industries, have been identified for preferential treatment. These are petroleum, engineering, automobile, consumer goods, oil and gas, branded products and information technology. These are industries the bank expects to grow rapdily in the next two or three years. The bank has earmarked special funding arrangements of between

$ 0.5 billion and $ 750 billion for each of these industries. Since the bank is keen to lend to these industries, it is obvious that companies in these segments will find it easier to negotiate for money.

Though this strategy is part of Citibanks global gameplan, the industries vary from country to country. Power, for instance, figures in Citis European country lists, but not in India.

This change of focus is part of Citibank plans to move away from being the bank of classes to the bank of masses. Our target is to be just one click, one telephone call or one mile away from the customer, says David Conner, chief executive officer of Citibank in India.

It has set a target of one billion customers worldwide by 2010. Its parent company, Citicorp, made a net profit of $ 4.1 billion in 1997, one-fifth of it coming from emerging markets.

The exercise involves converging retail and corporate banking. Explaining the logic, Conner says: The new strategy shows our interest in India as an emerging market. We spent two years on strategic planning during which we analysed the economic environment and competitive positions of different markets. We visualised different scenarios. We also realised that by focusing on corporate relations we were getting into a very narrow focus. We wanted to do something different.

How does the bank select an industry and a company within it for special facilities? As Conner explains, the bank has formed several teams of experts and appointed industry specialists to head each industry group. At brainstorming sessions, each head presents an overview of the status of the industry, its market, technology, export prospects, and the position of companies in the industry. At the end of the two-day session, an understanding is arrived at on the exposure that the bank would like to take on that industry.

For example, though the automobile industry is in our list of seven industries, we are aware that companies are going to face a lot of competition. So we have been cautious in deciding our exposure to the industry, Conner explains.

Citibank calls it embedded bank strategy. Sunil Mehta, vice president, sales/risk implementation head, says the package has been evolved to provide financial solution to corporates. Citibanks different departments -- credit card, cash management, risk management, corporate finance, treasury -- come into the picture once an industry has been indentified and all of them are expected to work towards making the credit decision a success.

The banks global contacts come in handy too, says Mehta. For example, its cash management division is regarded as one of the largest in this country, where it helps corporates through fast collection of cash and cheques from different parts of the country.

And what happens when a chosen industry faces problems? We have set up annual review systems where we assess the prospects of each industry once every year. That serves as the monitoring exercise for us, says Mehta.

Citibank has been in India since 1902. In its 96th year, its vision is to be large, dominant and number one globally, explains Conner. The attributes of the embedded bank concept are several. One, it seeks to expand its market share. For that purpose it is looking closely at opportunities. For example, in the automobile sector, it sees considerable scope for deployment of funds in the auto ancillary units and in the transport sector. Second, it will expand the customer base, by being proactive to the needs of potential customers. Three, finance is to be provided on an individual basis, productwise. Four, network is important. More branches are essential for this, but since that can take a long time to establish, the bank has emphasised concepts like electronic banking, telebanking, home banking and other technology-based products that give a distinct advantage to the customers.

But there are other attributes as well. Consistency in comitment is essential to us. We tell our customers that we want to be around for a long period. It is essential to impress this message on our customers, Conner adds. And as an example, he points to the fact that C itibank has not raised its prime lending rate although all other banks have.

A major lacuna that Citibank had found was the weakness in financial services. There were a number of defects, and the cycle time for delivery was quite long - at times running into weeks. So the bank decided to go on a quality journey. It adopted the concept of six sigma (a measure of standard deviation in mathematics), which is in vogue in the West, through which it intends to reduce its cycle time to one- tenth by 2010. For example, if it takes one hour today to issue a demand draft, its target is to do so in six minutes by the year 2010. This not only requires re-examination of processes but use of technology as well, explains Conner.

In a way, the new approach is centred on value addition in service. As yet, few banks offer the services that Citibank will, particularly the part that deals with market and technology status of industries abroad. The bank has a presence in as many as 99 countries, and will be using these assets to the hilt.

An essential ingredient of the new policy is to integrate back office and front office divisions. The front office will continue to meet customers and handle their requirements, and the back office will monitor the progress of the companies to which the bank has lent money. The back office will also act as a risk assessment team.

These persons will also undertake the risk management function. Since the risk planning and selling functions get pretty close, the exchange if information between the two will make the sales force more confident while talking to a potential client, knowing exactly how much leeway he has at his command.

Right now, however, skill levels at the bank are inadequate to handle this level of interaction. So Citibank has charted out a training programme for the staff.

The idea, says Mehta, is to improve productivity all round, and bring about an improvement in the quality of service. This process has begun and has yielded good results. Its cheque processing centre at Bandra in Mumbai won an ISO 9002 certificate in January 1998 for quality. This is the first time a cheque processing centre has been recognised for its quality, points out Conner.

Apart from expanding the product base and the customer base for commercial consideration, Citibank is also trying to improve its image as community bank. As part of its image management programme, it has tied up with a few non-government organisations (NGOs) working in community service, and has earmarked $ 4000 for this.

For Citibank, these efforts to turn more subaltern in its approach will require speed and agility because other banks are expected to join the race as competition picks up. The race, in fact, has already begun.