We Hope to Be Profitable This Year, Says DBS Chief
India’s the fastest growing country in the world now
DBS Bank will return to profit in India in the fiscal year ended March 2016 after posting a .₹ 275crore loss in the previous year, CEO Piyush Gupta said in an interview to ET’s Joel Rebello. The bank has recovered from a sharp rise in NPAs after writing off bad loans and is now concentrating on building its books in India. Last month, the bank infused .₹ 670 crore in India, taking the total amount of capital infused in the country to .₹ 6,500 crore even as it awaits the RBI’s go-ahead to start a whollyowned local subsidiary here. Edited excerpts:
DBS is among the few banks that have applied to the RBI for subsidisation. Any update? Nothing much. It’s still pending with the RBI. The RBI told us that it had to get its macro policy for subsidisation in place. Because every foreign bank had their own vision of what this would mean, like whether you could run with dual licences, for example. So, the RBI took a period of time to put the macro policy together.
They also told us that they had to go through the payment and small bank process. They told us that our application is still under consideration and they will get back. This is consistent with what they told us upfront, they told us that it should take roughly a year, it’s been a year.
A couple of years ago we saw a large jump in your NPAs. Is that problem over? When will you return to profits? We hope to be profitable this year and if anything, we were ahead of the curve in recognising the problem. The whole banking sector in India is struggling with the same set of issues, I just think we recognised them earlier and took pain earlier. We wrote off large chunks and recapitalised. We have put in a lot of capital in the country in the last two years. You have launched a new digital banking platform. What does it mean for your business? Branch networks are very expensive. Even in single-country banks, most of the big retail consumer banks in the US are reducing their branches. The answer lies in the opportunity that technology and digital provides. If you think about what’s happening in every other industry, whether it is taxis or retail…there’s no reason to believe that will not happen in banking and, frankly, the best parallel for this is what Alibaba has done in China. They have been able to create a completely mimicked banking franchise.
Why did you choose India to do this? India has three distinct reasons, one is the macro. India is the fastest growing country in the world right now, GDP growth rates are good, consumption is strong, the demographics are favourable. Second, is the digital infrastructure, the fastest expansion of smart phones, 200 million now, will go to 600 million, so it’s a rapidly booming digital market, but more than that it is the digital infrastructure. What India has created is unique, the one billion Aadhaar cards and the ability to electronic KYC for a billion people, very few countries have that as public infrastructure. The second layer is the Unified Payments Interface, which allows you to completely democratise payments, so you can use any kind of indexing to do payments.
What it means for your costs in India? You are also offering 7% interest on savings accounts… I think our overall cost structure in India will come down over time. It will be a fraction of the costs for a normal bank because we will not have a brick-and-mortar and we will have far fewer people. A normal retail bank, apart from its branch people, has a large call centre, large back-end operations etc. We have just automated everything across end to end. So, we have much smaller work force, much smaller physical premises and our cost point will be much lower. We believe that if we can reduce the cost point, then we can share the benefit (with higher rates).