She began her Journey Inheriting a Legacy of Hard-to-Change Processes, A Rebuilding Phase post the Worst of the Recession, And an ever Expanding Competition from Cutthroat Rivals. She has Weathered Every Storm and firmly Established herself as The Frontrunner among the Most Powerful Women in India Inc. In an Exclusive Conversation with B&E, Shikha Sharma defends Axis Bank’s future plans
B&E: What kind of overseas network does Axis bank has right now and what are your future plans with respect to the overseas market?
SS: We have four offices outside India right now. While Singapore, Dubai and Hong Kong are branches, Shanghai is just a representative office. However, we have RBI’s approval to convert the Shanghai office into a branch but we are still waiting for an approval from the Chinese regulatory bodies. Our intent of going international is primarily to help Indian customers and our clients who go overseas. Therefore we are looking at overseas locations where we can support our client base more efficiently. As far as UK operations are concerned, it’s a fairly lengthy process and all that we have right now is just an RBI approval.
B&E: What is the kind of growth that the bank is witnessing and what is your return from the infrastructure sector?
SS: As far as Axis Bank’s growth is concerned, we are one of the fastest growing private sector banks in the country. In fact, we have had a growth rate in excess of 40% in the last 5 years. We do not disclose our sector specific returns, but we are certainly focused on the segments which deliver us our target RoAs.
B&E: NIMs of banks have been under pressure for quite some time now and have been heading southwards. What about Axis Bank?
SS: Axis Bank had a lot of expansions in NIM last year due to factors like capital infusion, which lowered our cost of borrowing. Credit growth was also low last year so our CASA ratio went up dramatically. Lastly, refinancing of some of high cost deposits, which were raised during the crisis of October 2008, were done. All these factors led to NIM expansion and it went up to 4% in one of the quarters and we believe some of it will reverse out in the near future. In addition, policy interventions like an increase in CRR, interest on daily savings balance, are going to compress NIMs further. Though NIMs will get compressed, we still hope to maintain our long-term average of 3.5%.
B&E: But credit growth has not picked up as expected...
SS: In fact, credit growth has been quite good as growth in the sector has been around 18-19%; if we knock out the telecom part, it has been around 15-16%, but there is expectation that credit growth is likely to pick up in the next couple of quarters. In fact, as a bank, we have traditionally grown ahead of the sector and will likely be ahead in times to come. Like I said, the sector is growing at 18% and we are likely to grow at 24-25%, but it is tough to predict a specific number at this point of time. Further, interest rates will be affected by two factors, cost of borrowing and liquidity coupled with the credit demand. If there is a lot of liquidity and no credit demand then we can’t raise interest rates, at least on the lending side. We need to look at all these factors and as such can’t give specific answer. In fact, I had mentioned last year that this year is going to be a year of volatility, so you need to wait and watch.
B&E: What kind of overseas network does Axis bank has right now and what are your future plans with respect to the overseas market?
SS: We have four offices outside India right now. While Singapore, Dubai and Hong Kong are branches, Shanghai is just a representative office. However, we have RBI’s approval to convert the Shanghai office into a branch but we are still waiting for an approval from the Chinese regulatory bodies. Our intent of going international is primarily to help Indian customers and our clients who go overseas. Therefore we are looking at overseas locations where we can support our client base more efficiently. As far as UK operations are concerned, it’s a fairly lengthy process and all that we have right now is just an RBI approval.
B&E: What is the kind of growth that the bank is witnessing and what is your return from the infrastructure sector?
SS: As far as Axis Bank’s growth is concerned, we are one of the fastest growing private sector banks in the country. In fact, we have had a growth rate in excess of 40% in the last 5 years. We do not disclose our sector specific returns, but we are certainly focused on the segments which deliver us our target RoAs.
B&E: NIMs of banks have been under pressure for quite some time now and have been heading southwards. What about Axis Bank?
SS: Axis Bank had a lot of expansions in NIM last year due to factors like capital infusion, which lowered our cost of borrowing. Credit growth was also low last year so our CASA ratio went up dramatically. Lastly, refinancing of some of high cost deposits, which were raised during the crisis of October 2008, were done. All these factors led to NIM expansion and it went up to 4% in one of the quarters and we believe some of it will reverse out in the near future. In addition, policy interventions like an increase in CRR, interest on daily savings balance, are going to compress NIMs further. Though NIMs will get compressed, we still hope to maintain our long-term average of 3.5%.
B&E: But credit growth has not picked up as expected...
SS: In fact, credit growth has been quite good as growth in the sector has been around 18-19%; if we knock out the telecom part, it has been around 15-16%, but there is expectation that credit growth is likely to pick up in the next couple of quarters. In fact, as a bank, we have traditionally grown ahead of the sector and will likely be ahead in times to come. Like I said, the sector is growing at 18% and we are likely to grow at 24-25%, but it is tough to predict a specific number at this point of time. Further, interest rates will be affected by two factors, cost of borrowing and liquidity coupled with the credit demand. If there is a lot of liquidity and no credit demand then we can’t raise interest rates, at least on the lending side. We need to look at all these factors and as such can’t give specific answer. In fact, I had mentioned last year that this year is going to be a year of volatility, so you need to wait and watch.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles
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