Kathpalia also said that he does not want to grow inorganically as it will be weak for the bank. Edited excerpt:
Credit growth is at several-year highs, inflation is eroding consumer confidence, financial markets are volatile. What do they mean for the Indian economy?
Despite external disturbances, the Indian economy continues to improve. All the high frequency vectors…GST, freight, card spending, growth of the automobile industry… all are moving in a positive direction. With a deleveraging balance sheet in the corporate sector and a high capital adequacy ratio in the banking sector, we are poised for a very good growth rally for the next two to three years. There is no such NPA which is not provided by the banking sector. We have to watch for liquidity concerns, inflation and be cautiously optimistic, especially in vulnerable businesses.
Are you still seeing the pain at the bottom of the pyramid?
Rural development has happened but not at the rate at which urban development has taken place. Consumption is happening but not at the pace one would have expected as they are still coming out of the impact of Covid 2.0. In our book, you’ll see some (bad loan) flows in this quarter as well, but the flows will be much less than what you saw in quarter one, and by quarter three, they’ll keep coming down. The restructured ledger may not come down dramatically because of the rules that require payment continuity for 12 months before these accounts are taken away from the restructured ledger. We’ll end this year with 120-150 basis points of credit cost.
You have navigated three difficult years as an MD. What does the agenda for the next three years look like?
Looking at the last three years, the agenda was very simple. We have worked on building a strong liability franchise, resolving issues in our corporate book and strengthening the balance sheet. The agenda for the next few years will be based on our domain expertise. It sets us apart from the rest of the industry. We still need to do a lot of work on the description of the liability. I believe that liabilities lead the growth of assets. This will be followed by the launch of the Digital 2.0 strategy. In December and January, we will see the launch of a differently-abled technology stack. We will also continue to grow the corporate side of the balance sheet, and this should be 45% of our portfolio. And the final agenda is to drive new products, such as merchant acquisition, to diversify our microfinance business into microbanking in rural areas. IndiaScooter loan, and affordable housing loan.
What will happen in the next 5-7 years indusind Looking for a bank?
IndusInd Bank will look like a bank that has domain expertise. We will also engage in para-banking activities in the three areas of asset management, non-life insurance and broking. We will be treated as a big bank in five to seven years with an asset portfolio of more than `5 lakh crore. We will be the leading player in rural India because of our uneven distribution in that geography.
What is the plan to develop the microfinance book?
I think our development will be very different as we go forward. We have diversified this business into Merchant Acquisition business in semi-urban and rural areas. The book stood at ₹2,300 crore at the end of the first quarter; We expect this book to be worth Rs 10,000 crore in the next two years. In the case of scooter loans, we will be able to do a business of Rs 5,000 crore in the next two years. We will grow at the rate of 25-30%.