Double the Bank

Romesh Sobti, who has turned around the mid-sized private sector bank over the past 10 years, is now working on doubling the size in the next three years.

When foreign banker Romesh Sobti took charge at the midsized IndusInd Bank a decade ago, there were not many who would have believed in his vision to transform the private bank. The new generation private bank had legacy issues (Ashok Leyland Finance was merged with it), belonged to a corporate house (Hindujas) and other private banks like HDFC Bank, ICICI Bank and Axis Bank (earlier UTI Bank) had taken a huge lead both in terms of brand acceptability and also performance. The global financial meltdown was gradually spreading from the US and Europe to emerging markets like China and India. It was probably the most difficult business cycle for any new CEO. But Sobti did the unthinkable and succeeded in turning around the fortunes of the bank. Take a look. When Sobti joined the bank, profits were paltry at around ` 100 crore, revenues stood at ` 500 crore and balance sheet size at just

` 20,000 crore. Today, profits have pole valuted to ` 3,000 crore, revenues are in upwards of ` 10,000 crore and balance sheet is nearing the

` 200,000 crore mark. Yes Bank, Kotak Bank and IndusInd Bank are all midsized banks in terms of balance sheet.

There’s more. This Mumbai headquartered bank has generated immense wealth for the shareholders. The bank’s market capitalisation has risen from

` 4,000 crore a decade back to close to

` 100,000 crore. Sobti is now more ambitious. He plans to double the business numbers (loans, profits and customers) over the next three years. “It’s an ambition. We have done it twice in the last two business target cycles during 2011-

IT’S AN AMBITION (DOUBLE THE BANK). WE HAVE DONE IT TWICE IN THE LAST TWO PLANNING CYCLES DURING 2011/14 AND 2014/17. HOPEFULLY, WE WILL DO IT AGAIN.”

14 and 2014-17. Hopefully, we will do it again,” says Sobti, who has over four decades of work experience in public, foreign and private banks.

This exceptional performance year after year has put Sobti amongst the top performing CEOs in India. The 67-yearold has emerged as the Best CEO in the banking category in Business Today's annual listing of Best CEOs.

Sobti’s journey at the bank started with diversifying the portfolio as there was excessive dependence on commercial vehicle financing. Today, the bank is much more broad based. In fact, the bank has always been on the lookout

for diversification in products, customer base and also geography. In the last decade, the bank exploited the opportunity in urban and semi-urban areas. Sobti, like every other banker, saw a huge opportunity in the rural and semiurban areas. In fact, in the last two years the bank has been strategising how to cover these new emerging centres. The market got more clarity when Sobti’s bank pounced on micro lender Bharat Financial Inclusion. This micro finance institution fitted very well into the bank’s strategy of diversifying products, customer and geography. “This acquisition will do all that for us,” says Sobti, who is getting a network of 1,400 branches, loan book of close to ` 10,000 crore and 6.8 million micro loan customers..

Sobti has actually never shied away from acquisitions. The bank acquired Deutsche’s credit card business in 2011. It was the bank’s entry into the card business. Similarly, five years later, it bought RBS’s diamond and jewellery business to grow this new business. Just before Bharat Financial, the bank bought IL&FS Securities Services that was into loan against shares, depository and custodial services to investors.

Micro finance business is not something new to Sobti. He did it as a banker at the largest bank in the country, the State Bank of India, in his initial years. Later, Sobti managed this business at ABN Amro where he was the head for almost a decade. IndusInd's own microfinance book before the merger was ` 3000 crore. With the acquisition, the book will swell to ` 13,000 crore.

The expanded network in the semi-urban and rural areas would help the bank in pushing many of the banking products. “We can do savings, payments, micro insurance, consumer goods financing and other banking products,” says Sobti. The new network has also opened many new possibilities. For example, consumer durable financing is something the bank plans to explore in future. NBFCs are already raking in money in this low ticket size, high volume business. Some banks are exploring the potential in this business because of digitisation. The bank is also betting big on emerging business like insurance and wealth management. The bank also has domain expertise in vehicle financing, micro finance and diamond financing. “Taking leadership in domains takes years,” says Sobti.

Sobti is also using the partnership model to grow the bank. “Why should you invent what somebody else does better than you,” says Sobti. The bank has a very long term partnership with HDFC Ltd for housing loans. In the new emerging digital banking world, Sobti says the full ecology of players – banks, payment companies like Visa and Mastercard, payments banks, FinTechs, business correspondent using technology – are available for collaboration. “It is not so much about competition. It is more about collaboration. This whole ecology will collaborate,” says Sobti. IndusInd bank is already working with Fintechs like Mobikwik and PayTM Payment Bank.

Sobti is using digitisation to increase productivity in the backend and to create lower cost delivery to customer. The changes are already visible. Typically, a metro branch of IndusInd Bank used to be 2,500 square feet. It is today 1100 sq. feet. “What we do inside the branch has changed because everything is centralised,” says Sobti.

Clearly , Sobti has set the agenda for future. The bank’s board will now have to take a call on Sobti’s successor. “I can only give my advice. The board will take the final decision,” says Sobti, whose three year extension ends in January this year. Currently, the bank’s top management is from foreign banks. Sobti, who can continue till 70, says there is a desire to create continuity of thoughts and action. “We have a deep bench strength,” he signs off.