We Hope to Be Prof­itable This Year, Says DBS Chief

In­dia’s the fastest grow­ing country in the world now

The Economic Times - - Economy: Macro, Micro & More -

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).

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