Kathpalia also said he is not looking to grow inorganically as it will be dilutive for the bank. Edited excerpts:
Credit growth is at multi-year highs, inflation is denting consumer confidence, financial markets are shaky. What do these mean for the Indian economy?
The Indian economy continues to progress well on recovery notwithstanding the external disturbances. All the high-frequency vectors…GST, freight movement, card spends, automobile industry growth…are all moving in a positive direction. With deleveraging of balance sheets in the corporate sector and high capital adequacy ratios in the banking sector, we are poised for avery good growth rally for the next two to three years. There are no NPAs which have not been provided for by the banking sector. We have to watch out for liquidity concerns, inflation and be cautiously optimistic, specifically in the unsecured business.
Are you still seeing the pain at the bottom of the pyramid?
Rural growth has happened but not at the pace at which urban growth has happened. Consumption is happening but not at the pace one would have expected because they are still coming out of the effects of Covid 2.0. In our book, you would see some (bad loan) flows this quarter also, but the flows will be far lesser than what you saw in quarter one, and by quarter three, they will continue to come down. The restructured book may not come down dramatically because of the regulations to have continuity of payments for 12 months before these accounts are moved away from the restructured book. We will end up with 120-150 basis points of credit costs this year.
You have navigated three tough years as an MD. What does the agenda for the next three years look like?
If you look at the last three years, the agenda was very simple. We have worked on building a strong liability franchise, ironing out issues in our corporate book, and fortifying the balance sheet. The agenda for the next few years will be building on our domain specialisation. This differentiates us from the rest of the industry. We still need to do a lot of work on the granularisation of liability. I continue to believe that liabilities have to lead the growth for assets. Next would be the launch of a digital 2.0 strategy. In December and January, we will see the launch of a differently-enabled technology stack. We will also continue to grow the corporate side of the balance sheet, and it should be 45% of our portfolio. And the last agenda is to drive new products, like merchant acquisition, diversify our microfinance business into micro banking in rural India, scooter loans, and affordable housing loans.
In another 5-7 years what will IndusInd Bank look like?
IndusInd Bank will look like a bank which has domain specialisation. We will also be in para-banking activities, in three areas of asset management, non-life insurance and broking. We will be considered as a large bank in five to seven years, with an asset portfolio of more than `5 lakh crore. We will be a leading player in rural India because of our inordinate distribution in that geography.
What is the plan to grow the microfinance book?
Ithink our growth will be very different as we go forward. We have diversified this business into merchant acquiring business in semi-urban and rural areas. This book was at `2,300 crore at the end of quarter one; we expect this book will become `10,000 crore in the next two years. In terms of scooter loans, we will be able to do a `5,000 crore book in the next two years. We will grow at 25-30%.