We will have to look for acquisitions both in the domestic market as well as overseas to build scale -O.P.Bhatt, chairman, SBI
Bankers normally do not believe in making New Year resolutions. Their work and play revolve around the financial year that begins in April. That is when public sector banking bosses who run close to 70% of the industry, write a statement of intent on their business plans to the finance ministry that represents the government, the majority owner of these banks. In contrast, CEOs of private sector bank, follow their boards on every business decision.
If the banking community were to make their wishes known on 2008, some of the high profile ones would have probably said it this way:
K.V. Kamath, CEO and MD of ICICI Bank Ltd
I have only one wish in 2008—the Reserve Bank of India (RBI) should come out with its guidelines on holding companies in banking groups fast. On 30 November, RBI promised to come out with yet another draft guideline on this but I doubt whether this will happen during my tenure at ICICI Bank. Usually regulators do not say an outright no on contentious issues, they prefer to keep quiet and take no decisions.
Frankly, we do not have much time left as the foreign institutional investors in our proposed holding company for insurance and asset management businesses, ICICI Financial Services, will not wait for long. They have committed about Rs2,500 crore for a 5% stake and we even received an approval from the Foreign Investment Promotion Board, the regulatory authority for such deals.
Our plan was to raise money from the public by the fiscal year-end to invest in the insurance business. Under Indian law, banks cannot invest more than 20% of their net worth in their non-banking subsidiaries. Since the insurance business is heavily capital-intensive, we planned to float a holding company for such businesses so as to free up the banks’ capital. But RBI is not comfortable with the idea as it feels that a holding company for non-banking businesses would fall outside the supervision of the banking regulator.
The regulator’s concerns can be addressed if an intermediate holding company is set up as a non-banking finance company, which would be regulated by the apex bank, even if engaged in the business of investment in group companies. In fact, the Indian Banks’ Association too has said the issue of creating an appropriate structure for non-banking financial subsidiaries of banking companies needs immediate attention, given the capital requirements of these businesses, especially the insurance business. Hope RBI will listen to it.
Sanjay Nayar, CEO, Citi India
There is a widespread perception in India that I was very close to Chuck (Prince), the former CEO of Citigroup Inc. I don’t know where people got this idea. During his tenure, Chuck was in India only twice—in October 2005 and in March 2007. He was planning to come to attend the India Economic Forum in Delhi in November but that didn’t happen as he stepped down.
In October 2005, Chuck had the famous dinner with Deepak (Parekh of Housing Development Finance Corp. Ltd, or HDFC) where he decided to pick up a stake in HDFC. People credit me with the deal, but it was Chuck who took the decision, I was merely instrumental in arranging the meeting. I miss Chuck, but Vikram (Pandit) is the best thing that could have happened to Citi. After taking over, he made his priority clear: “Simplifying the company’s organizational structure and aligning our businesses and resources with appropriate goals and economic realities will be among our initial priorities.” People in the industry feel there will be more focus on India, but it is already one among Citi’s five priority markets, the other four being China, Brazil, South Korea and Mexico.
We are all professionals and I won’t enjoy any special privilege because Vikram is an Indian. Others say our relationship with the local regulator will improve now. After so many years, RBI has given its nod for a few new branches. If Vikram can get us more, and one local bank when the sector opens up, it will be great.
O.P. Bhatt, chairman, State Bank of India
Investors are counting the days for our rights issue. The stock price, which touched its lifetime high of Rs2,475, is now ruling at Rs2,384 and it may even go up further. But believe you me, I am not burning the midnight oil on the issue. The finance ministry’s formal nod has not yet come, and neither have we appointed merchant bankers (though the media has been speculating on this). We need capital for growth and the rights issue will help us mobilize it.
But my larger interest is in the merger of seven associate banks with the parent bank to make it big. We have initiated the move with the merger of the smallest of the associate banks, State Bank of Saurashtra. But this has not gone down well with the trade unions and officers’ associations. They have protested and even gone on strike. The merger formalities are not yet over and we need to make the integration a smooth process. Once we stomach this merger, we plan to integrate other six associates slowly but surely in due course. I am quite open about this and have continuously been discussing with my colleagues.
We will have to look for acquisitions both in the domestic market as well as overseas to build scale. If we don’t do that, Kamath’s ICICI Bank will overtake us in no time.
Y.V. Reddy, governor, RBI
No more rate hikes by US Fed this year, please.
Tamal Bandyopadhyay keeps a close eye on all things banking from his perch as the Mumbai bureau chief of Mint. Please email comments to bankerstrust@livemint.com
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