Business - Q&A ICICI CEO K.V.Kamath

George Smith Alexander & Shaji Vikraman

ICICI Bank has fought quite a few battles in the financial market. Over the past few years, the country's largest private lender has taken the fight for leadership right into the camp of foreign and large Indian banks. However, over the past few months, and especially in the last few weeks, it has been scrambling to fight off rumours and to allay apprehension of its stakeholders. Amid this, its CEO K V Kamath took a break and spoke to ET about the bank's perception and other issues:

Unlike other Indian banks, there is perception in the market and outside that ICICI Bank's aggressive lending practices, quality of its retail portfolio, global investments and loan book are much more worrisome than what appears on the surface.

It clearly appears that we have been subject to malicious rumours. I honestly cannot say why we have been picked up. Maybe in the banking sector, this is the pick which stands out. If you see the events in the past two weeks, there is a pattern in the way things are happening. We have not gone about and squandered capital. It is there and will be used effectively.

There are concerns relating to the way ICICI Bank has grown its international balance sheet. How valid are such concerns?

We have completely exited the non-India CDOs and CDS which were at around $700 million. There are no NPAs in our UK book on the lending side. Any book which is trading will have a mark-to-market impact. In our case, the book is not of assets which will move to a level that overall capital would be impacted. Market fluctuations will occur. It will be accounted for at the quarter end. Between the UK and Canada, we are sitting on liquid cash of $1.5 billion. Around 30% of our UK book is term deposits. The UK trading book is there due to regulatory requirement. Indeed, there are fluctuations as even US banks, which were clearly of a rating that nobody had expected to move, have been impacted.

Given the aggressive pace at which your bank grew over the past four years, skeptics say that retail delinquencies would peak over the next couple of quarters. What is your view?

The perception is totally out of context. The retail business was done when the opportunity was there. When we saw interest rates climbing, which was a year-and-a-half ago, we started putting brakes. We find banks who still have not put the brakes. Good luck to them. They will come to know about it at the right time. The other reason for the slowdown was on unsecured credit where it became difficult to collect. This is part of a development process in any country. This quarter we will peak on the provisioning. In some businesses, where we saw a little larger-than-expected delinquencies, we have exited them. We have tightened our credit parameters in various other products in the past six months. The effect of that will also start showing. In that sense, after this quarter, the peak should be behind us. We have exited 'unsecured'. Today, we are basically into auto and mortgage. The rest of the business – credit cards, personal loans, a little bit of two-wheeler loans – is to our existing customers via our branches.

In terms of business, the bank stated that the retail portfolio will grow 5-10%, while the international book will grow at 30%. What has changed now?

The retail book is growing at that pace even now. In the current global context, we would be happier to slow down our international growth, but not dramatically. I still believe in the Indian credit story, and a bank should continue lending, but with care.

In the current context, it is obvious that fund-raising could be tough. With your holding company still to get a regulatory nod, how will you handle future business growth of the subsidiaries?

If we are looking at almost 13.4% capital adequacy ratio against the required 9%, you can assess what the surplus capital would be. However, it would not be prudent to allow our CAR to come down. So, as and when, any of our subsidiaries need capital, we will have to look at options available. At the moment, the life insurance business is the most capital-hungry. We are expecting that something could happen in October. I'm sure that the government will consider allowing market access to these companies. If they allow listing of subsidiaries, then we will go ahead with that.

There is speculation relating to the succession plan in ICICI. Has it been finalised?

It's true that my term will end by April next year, and I will not be continuing with ICICI in an executive role. Beyond that, whether I have a role here or not, will be a call that shareholders and board members will have to take. It would be presumptuous on my part to make a comment on that. But if I am asked to serve, I will certainly consider it positively. As far as leadership is concerned, we have groomed a set of leaders. There is a core group which has demonstrated its ability to build businesses and lead companies. The board will take a call. I can assure you that the process of finding a leader is not necessarily internal, but also external assessments have been going on for a year now. It is a formal process. A long list of names were looked at and as the case would be with any company, that list will keep narrowing down till the board takes a view.

There is a buzz that you will continue as the group chairman in an executive role.

No, I don't see myself as chairman in an executive role. That has been a policy we have never been comfortable with. Today, in a regulatory context also, it is not a feasible option.