‘Opportunities ahead will only multiply’
V VAIDYANATHAN, former executive director of ICICI Bank, turned entrepreneur to start Capital First, a private financial institution that catered to smaller businesses. He speaks to Pavan Lall about his new entity, IDFC First Bank, formed by merging Capital First with IDFC Bank. Edited excerpts:
Capital First and IDFC are very different institutions. How will they mesh?
The finest properties IDFC Bank has is its banking licence, super people and a perennial source of liabilities that make it durable as a business. The bank has a strong wholesale team and very good products.
As far as retail lending (to individuals) is concerned, Capital First has built a loan book of ~300 billion, diversified over seven million customers and with very low net non-performing assets, of less than one per cent across cycles. The capital adequacy is around 16 per cent. So, when we combine these models and put it on a banking platform, it can be scaled up. Don’t forget the immense opportunity that awaits.
What's the new culture at the merged entity turning out to be?
The culture at both institutions is very forward-looking. People are energetic and looking to positive growth and that is a unifying, as well as a defining, purpose. This is not just marketing spiel — I really mean it. Personally, I would like the organisation's culture to be one that is with unity of purpose, a bias for action and with energy. And, in today’s context, should have integrity of personal conduct across the entire employee base.
Your exposure to (defaulting) IL&FS?
Capital First — Nil. IDFC Bank — their management can answer that but to the best of my knowledge, also nil.
Your thoughts on NBFCs (non-banking financial companies), given the current meltdown?
The need for taking financing to the relative bottom of the pyramid is a crying one and NBFCs’ can and are specialising in that. The second is that as India continues to grow at seven-plus per cent (annually) and becomes a $5-trillion economy by 2025 as projected, the opportunities will only multiply. The government and the Reserve Bank wish for such penetration to grow. So, put the three pieces together — opportunity, regulatory environment and consumer base — and the picture is clear. The current testing times will pass and I’m expecting certain norms with regard to liquidity management and asset/liability management, which should set further guardrails in the days to come.
What could we expect from IDFC First’s new product suite?
We believe that as a bank, we will have a much more rounded approach, despite retail (lending) being a large piece of the total.