You do not need much convincing when you sit across the table with Rana Kapoor, 55, Founder, CEO and Managing Director of India's youngest private-sector lender, YES Bank. You are readily swayed by his persuasive manner.
Pralay Mondal, the bank's head of retail business, will vouch for that. Mondal, who was previously Head of Retail Banking at HDFC Bank, accepted Kapoor's offer to join YES Bank at their first meeting itself. "The meeting lasted two hours," says Mondal, who took over in June.
The poaching of this top executive from a bigger rival was a clear indication of Kapoor's game plan. The focus now is on scaling YES Bank's retail business. This will not be easy, considering the stiff competition not just from private-sector lenders such as ICICI Bank and HDFC Bank but also from a battery of staterun banks. But Kapoor is used to overcoming challenges.
was the first fully Indian-owned bank, established in 1865.
In just eight years since YES Bank was granted a banking licence, Kapoor has managed to create a bank with a balance sheet size of a staggering Rs 73,662 crore. In the Business Today-KPMG study 2012
, YES Bank has emerged the best midsized bank, edging out close rivals such as Kotak Mahindra Bank and DBS Bank as well as last year's winner, IndusInd Bank.YES Bank
has also scored highly on several parameters. Its asset quality is good, with net bad loans at 0.05 per cent of advances. Capital adequacy is at a comfortable 17.90 per cent, while the cost-to-income ratio, at 0.38, is one of the lowest in the industry.
One area where the bank lags behind is in the share of fee income to total income, which at 11.08 per cent is lower than the 20 per cent of some other banks.
Kapoor, a first-generation entrepreneur, does not believe in resting on his laurels. Having built the corporate banking business at YES Bank, he is looking at expanding the consumer lending business.
The retail expansion is already underway. In the last two-and-a-half years, the bank has increased its branches from 150 to more than 400. The staff count has jumped from 3,030 to more than 6,300 employees.
"We are adding 1,200 to 1,500 employees every year," says Kapoor.
Sitting in the bank's Mumbai headquarter, he adds that the target is to increase the number of branches to 900 and the staff count to 12,750 employees by 2015. The number of ATMS will rise to 2,000 from 725 currently.
Retail banking is not an area Kapoor is very familiar with, since his work experience, before he turned entrepreneur, was more in corporate and investment banking at Rabo India Finance, ANZ Grindlays and Bank of America. That is where Mondal plays his role.
"Retail is an exciting business," he says. This IIM-Calcutta graduate previously worked with consumer-goods behemoth Colgate Palmolive, software giant Wipro, Standard Chartered and HDFC Bank. "The basic DNA of retail is the same, whether it is fast-moving consumer goods, information technology or banking," he adds.
Mondal is already busy connecting the dots. The bank has launched an array of retail products, such as loans to buy homes, cars and farm equipment, as also loans against gold. The bank wants to test the waters initially and is not looking at high volumes.
"We are first going to cross-sell our products to our own customers rather than through direct selling agents," says Mondal. He says it is important to know customers' needs and then sell them appropriate products. "Retail is more about execution than strategy," he adds.
The customer focus is evident from Mondal's decision to use the bank's branches to tap small and medium enterprises (SMES). Earlier, YES Bank had a separate vertical for SMES. "That is what customer centricity is all about," he says.
says the bank intends to become a one-stop shop for all financial services. The idea is to offer mutual funds, insurance, and wealth management services on a common platform. Kapoor is open to taking a minority stake in an insurance venture. "Mutual funds and retail broking will be for augmentation and acceleration of our retail strategy," he explains. The mutual fund strategy will be focused on debt schemes. "The debt market in India has not been tapped on the retail side," he adds.
To get a toehold in the fiercely competitive retail banking segment, Kapoor is conscious of the need to improve awareness of the bank's brand. "The brand will play a big role in building the trust and confidence of customers," he says.
In just eight years since he got a banking licence, Rana Kapoor has created a bank with a balance sheet of Rs 73,662 crore.
The big challenge for YES Bank will be to manage its retail liabilities. This includes raising more low-cost deposits. Jaideep Iyer, Deputy Chief Financial Officer, says the aim is to increase the share of current and savings accounts, at present around 17 to 18 per cent of total deposits to 30 per cent by March 2015.
YES Bank has already moved aggressively to offer higher interest rates on savings accounts, after the Reserve Bank of India last year lifted its control over the savings rate. That has led to a five-fold jump in savings deposits, from Rs 728 crore to Rs 3,750 crore in just one year. "This strategy will work for us in the short, medium and long term. Savings accounts anchor a lot of other products in a bank," says Kapoor.
YES Bank is on a growth path, but in an environment where risk is increasing. Already, the BT-KPMG study showed the bank's restructured loans were 0.57 per cent of its advances, which puts it at ninth position in this category among midsized banks. It is a warning Kapoor should heed.