ICICI has trebled its domestic branch network in the
past three years and expanded its international operations to 18
countries. ICICI chief executive, Chanda Kochhar, talks to MaryRose
Fison about how the lender will take advantage of India’s
burgeoning growth and cement its position as the country’s largest
private sector bank.

Chanda Kochhar, ICICI: “There is a huge amount of opportunity that is awaiting us”

For India’s second-largest lender,
ICICI, 2010 marks a milestone in more ways than one. In May, the
bank opened its 2,000th branch, strengthening its position as the
country’s largest private sector bank and in June it received
shareholder approval to acquire Bank of Rajasthan.

The deal is the latest in a long
line of strategic developments that have catapulted the bank to its
present position, dominating retail banking in the private sector
of the world’s second most populated country.

Formed in 1955, the bank was first
created as a development financial institution to provide medium
and long-term project financing to Indian businesses. In the 1990s,
following widespread economic reforms within the country, it
transformed into a diversified financial services group opening its
services to retail as well as corporate clients. In 1999, it became
the first Indian company to be listed on the New York Stock

Today the bank has total assets
worth INR3.63trn ($ 77.1bn) and reported consolidated net profits
of INR46.7bn for the 12 months to 31 March 2010.

As well as having a wide branch
network in India, its international operations have grown to
encompass divisions in 18 countries, including the UK, Russia,
Canada, the US, Singapore, Bahrain, Dubai and China.

The latest deal with Bank of
Rajasthan, currently awaiting regulatory approval, will increase
ICICI’s branch network by approximately 25%, and also provide a
direct channel to 3m more customers in India’s largest state based
on land size.

Speaking exclusively to
RBI, Chanda Kochhar – the first female chief executive of
ICICI and ranked the 20th most powerful woman in the world last
year by Forbes magazine – explained her strategy for the
coming months.


Assets: ICICI – loan book , FY2010Expanding existing

At the top of the list is the smooth integration of Bank of
Rajasthan. Kochhar intends to leave the bank’s existing staff in
place, but plans to expand its offering to clients. It is a shrewd
move given the value placed on personal relationships between
customer and bank staff as well as the linguistic challenges
presented in a country with more than a dozen official

Kochhar said that the bank had
historically held a single-product relationship with its customers
– most often in the form of deposit-based accounts – and she would
widen this offering so as to be able to offer other financial
products going forward.

“What we are going to do is
actually enhance our offering to the customers. They have been with
this bank [Bank of Rajasthan] for a long time; they have been
satisfied with the kind of relationship and customer service that
they have received.

“So for us, from here, we are going
to enhance the number of products that we can offer to these
customers so that the relationship becomes strong without
disrupting any of the existing services or facilities.

“We will be able to market our
mortgage products, car loans, commercial vehicle loans, investment
products and so on to these customers and substantially increase
our business from these branches.”

While Rajasthan tops the Indian
states in square kilometres, Kochhar acknowledges there is
diversity in the state’s spread of wealth.

“Rajasthan as a state is at a
middle-income level in India. It is neither one of the very high
ones in terms of income per capita nor one of the really low ones,
so it is on the average side and if you look at the profile of the
customers it is quite widely diversified,” she said.

“You have some important government
accounts. On the other hand you have very, very small micro
accounts in the rural areas.”

Kochhar joined ICICI in 1984 and
following a series of promotions – she has headed every major
function of the bank in her 26 years with the bank – became CEO in

Some chief executives might shudder
at the prospect of clients leaving after a change of ownership, but
Kochhar is confident Bank of Rajasthan’s clients will not defect to
competitor banks because of carefully planned integration, enhanced
product offerings and retention of local bank staff after it
assumes ICICI’s branding.


Distribution: ICICI – branch numbers, India 2003-10Weathering the credit

ICICI’s fiscal 2010 full year consolidated net profits of
INR46.7bn, up 31% from the previous year, represented a solid
performance. Of particular note was its success in growing its
current and savings account ratio (CASA) to 41.7% from 28.7% a year

But in spite of its strong results,
not all of its metrics showed positive growth over the last year.
Total deposits fell by 7.5% to INR2.02trn at the end of fiscal
2010, but Kochhar said this was the result of a planned

“Our attempt last year was to align
balance sheet growth with a more cost-efficient funding mix.
Accordingly, as a conscious strategy, the bank focused on building
its low-cost deposit franchise even as it reduced its reliance on
wholesale deposits. While this led to a reduction in overall
deposits during the year, the share of low-cost deposits in the
funding mix has increased allowing the bank to participate in
growth opportunities more profitably,” she added.

The loan book also fell in fiscal
2010 – by 16.9% to INR1.81trn, partly due to repayments from the
retail loan portfolio and the loan portfolio of overseas


Maintaining strong capital

Indian and Asian markets generally have been less hard hit by
the global financial crisis than countries in Europe and the
Americas, but it has not stopped the Reserve Bank of India imposing
tough capital adequacy guidelines. It goes some way to describing
the bank’s conservative attitude to risk that it did not just match
the required levels – it substantially exceeded them.

ICICI’s capital adequacy at 31
March 2010 as per Reserve Bank of India’s revised guidelines on
Basel II norms was 19.4% and Tier 1 capital adequacy was 14%, well
above the central bank’s requirement of 9% and 6% respectively.

“We had raised the capital just
before the global financial crisis. Through the period of the
crisis, we focused on conserving capital and building efficiencies
in our operating and business performance. The capital buffer will
now be useful for us as we look to participate in emerging growth
opportunities and also prepare to operate in a tighter regulatory
environment with tighter capital and liquidity requirements,”
Kochhar said.


Low-cost liabilities: ICICI – CASA depositsGrowing the client

It is against this backdrop that Kochhar intends to bring on
board an additional 200,000 new retail clients each month. Taken in
isolation it is a colossal goal but set within the context of
India’s ballooning population, currently numbering approximately
1.2bn, it sounds less unrealistic.

“It is about how we tap into those
customers who are coming into the consumption market for the first
time. Every year India has about ten to 12m people in the working
age group who start earning for the first time, who start their
salaries for the first time so that pool of ten to 12m customers
every year that get added will be the customers we attract.”

Kochhar’s ambitious approach to
business going forward is reflective of the nation’s burgeoning
economy as a whole. According to the World Wealth Report published
by Merrill Lynch and Capgemini in June, India is one of the most
promising countries of the world in terms of its forecasted gross
domestic product growth (GDP) next year. While world GDP contracted
last year as a results of the global financial crisis, economic
growth in India soared to 6.8%. By contrast, Western European GDP
shrank 4.1%.

This year and in 2011, the report
predicts the region of Asia-Pacific excluding Japan is expected to
show the strongest GDP growth of any region at 7% in 2010 and 6.4%
in 2011 with India and China leading the drive. In addition, the
nation’s collection of high net worth individuals (those with more
than $1m) is also increasing faster than any of the nine other
countries assessed. In 2009, it had 126,700 high net worth
individuals, up by 50.9% from 2008.

Kochhar said that ICICI’s extensive
branch network will be key to maximising the benefits of India’s
growth, reaching more clients in more areas.

“We now have over 2,000 branches.
But two years ago we only had 1,000 branches and three years ago,
only 700 branches. As the number of branches grows, as we deepen
our network, as we widen our network it gives us the ability to
reach out to these newer customer segments,” she said.

“As we expand our branch network
and establish our branches into newer and newer areas, that gives
us the ability to go into these different areas and tap the
households that exist in these areas to go and take away market
share from existing banks.”



Key to achieving these goals will be maintaining the bank’s
ultra-efficient processes. Retaining a CASA ratio of at least 40%
and keeping costs at between 1.6% and 1.7% of total assets are key
goals. Having increased its fee income stream by 13% in the most
recent quarter, Kochhar said she would like to continue this trend
upwards although precise details are not being disclosed by the

With so much on offer, Kochhar
admits that the biggest challenge for her is knowing how to take
advantage of the country’s growth.

“The challenge is that of a big opportunity which awaits the
country,” she said.