Increased Competition Of Banking Talent - Murali M Natrajan, MD & CEO, DCB Bank

It is a tough market. Many banks are facing huge NPA issues, which further impacts lending and risk taking. There is liquidity pressure, and many companies are bearing and brunt of lower sales, lower margins and a longer collection cycle. So, the system as a whole seems to be experiencing stress.

Our economy is going through major challenges at the moment. We have a CAD issue, stubborn inflation and low growth. Capital investments are weak because of lack of confidence, opportunity and risk appetite. Given the overall volatility and weakness, it is not easy to get the private sector or foreign entities to invest in India at the moment either. 

It is a tough market. Many banks are facing huge NPA issues, which further impacts lending and risk taking. There is liquidity pressure, and many companies are bearing the brunt of lower sales, lower margins and a longer collection cycle. So, the system as a whole seems to be experiencing stress. It is natural for loan quality to be affected especially in the Corporate and SME segment. Over time, retail loans may also face NPA pressure, especially unsecured personal loans and credit cards.

A few months ago, it looked as though the interest rates may start to come down. In the last few days, however, the shorter tenure interest rate has moved up sharply, forcing a couple of banks to increase the base rates. 

We have done well in the last three years and are hopeful of delivering 25 per cent growth in their balance sheet in FY14. Secured retail loans are our main focus. We are confident of maintaining a CASA ratio of 25-30 per cent and NIMs of 350-325 basis points. We are adopting a cautious approach and are confident of conaining the NPAs within the acceptable levels.

The rural sector has plenty of opportunity. The telecom and media explosion has clearly impacted the aspirations and lifestyles of the rural population. In order to meet the new priority sector guidelines, banks have to open more and more rural branches, including those in the hitherto unbanked areas. Finding suitable premises for the branch, uninterrupted telecom connectivity, infrastructure and talent are some of the current challenges for expansion in rural areas. 

It is not clear as to when and how many new bank licenses will be issued. The whole process may take around six to nine months. Most banks including DCB Bank are already competing with the current list of new banking applicants on the loans side. There may be increased competition on the deposit side when new banks enter the arena. Initially, there may be increased competition of banking talent. 

We are working on a number of steps to compete with the new and existing banks. We are strengthening our HR processes by introducing creative ways of talent hiring, training and retention. We are also putting enormous effort in improving our service delivery and culture further so that we can increase customer loyalty.

Online banking is all about convenience. In most big cities, traffic is terrible and parking facilities are equally bad. So, why should anyone bother visiting a branch. That is slowly becoming a thing of the past. I see huge potential in online banking. The younger generation may not ever visit a branch except to complete the KYC formalities. In order to protect the interest of banks and customers, continuous efforts have to be made to make online banking safe and secure.

The overwhelming preference for smartphones is a trend that is very good for online banking. However, in India we still have bandwidth issues. I don’t think face-to-face banking will or personal touch in banking will disappear. Banks will use mobile phones more actively to have video conversations with customers. Regular transactions will continue to move to online banking freeing up time for branch and call centre staff to give personal attention to attending to deposit and loan needs of the customer. 

As regards creating value, I believe that the CEO and Management Team along with the Board must establish a strong governance process, treat investors with respect, be transparent, set realistic business goals and expectations and consistently deliver performance. This will automatically increase shareholder value.