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'Small banks will survive challenges from big players'
Thursday, 19 June 2008, 19:30 IST
Chennai: P.T. Kuppuswamy, chief executive and managing director of Karur Vysya Bank Ltd (KVB), disagrees with those who say small banks have a bleak future in the highly competitive banking sector.
In an interview with IANS, he said the small banks in the country had withstood competition from new generation and foreign banks.
Started in 1916 in a small town, Karur in Tamil Nadu, KVB has emerged as a trendsetter among the old generation private banks by adopting modern technologies and reforming itself. Emphasising this success story, Kuppuswamy says the bank's position is steady though there is tough competition.
Excerpts from an interview:
Q: Has the old generation banks like KVB lost precious time in expanding their reach? KVB is still perceived as a south-based bank.
A: It will not be proper to call KVB a south-based bank as it has a pan-India presence with branches in Chandigarh, Delhi, Gujarat, Haryana, Madhya Pradesh Maharashtra, Orissa, Punjab, Uttar Pradesh and West Bengal. KVB opened 31 branches during 2006-07 and 19 branches in 2007-08. We have opened three branches so far (this year) and have 34 more pending licences on hand. The aim is to cross 320 branches by the end of the current fiscal.
The other old generation banks are also making use of the liberal branch licensing policies of RBI (Reserve Bank of India) and are growing rapidly.
Q: What is KVB's strategy to attract youth? Do you have any plans of offering private banking service to your customers like other private banks?
A: KVB has a sizeable percentage of youth in its clientele base. Targeting youth now is part of our overall business strategy. Private banking services are not immediately on the cards. We believe banking is our principal business, and other ancillary services like bancassurance, depository and sale of mutual funds will also provide a convenient basket to our customers.
Q: What are the key issues influencing consumer lending in India?
A: Inflation, increased pricing of loans, central bank directives on increased risk weightage on personal loans are some of the factors that impact consumer lending. Automobile, electronic goods are the sectors that predominantly drive growth in consumer lending.
Q: What is your expectation on KVB's consumer lending for 2008-09? What is your loan-loss ratio in this portfolio?
A: We expect the portfolio to increase by 25 percent during fiscal 2009. The RBI's plans to tighten the credit may have marginal impact. Last fiscal, our consumer lending increased. The loan-loss ratio has decreased during fiscal 2008 in view of our increased thrust on recovery measures. Eighteen percent of the total NPA (non-performing assets) is related to retail advances and this is expected to go down further this fiscal.
Q: Could you give a break-up of KVB's advance portfolio? What is KVB's capacity to lend to corporates?
A: Our corporate and wholesale banking advance portfolio is 
42.5 billion ($1 billion) and the retail portion is 51.7 billion. The limit for single corporate is 2.38 billion and the group limit is 4.76 billion. For infrastructure lending, an additional five percent is permitted.
Q: KVB's business target for this fiscal is 280 billion with deposits 160 billion. How do you plan to achieve the deposit target?
A: The branches are engaged in active marketing to canvass business. Generous incentives for performing branches and liberal ex-gratia to the staff are offered. The bank is also mulling over stock options. Added to this, we are coming out with new products and services like utility bill payment, enhanced features in our internet and mobile banking services, which will attract customers and help us in achieving our deposit targets.
Source: IANS
42.5 billion ($1 billion) and the retail portion is 51.7 billion. The limit for single corporate is 2.38 billion and the group limit is 4.76 billion. For infrastructure lending, an additional five percent is permitted.
Q: KVB's business target for this fiscal is 280 billion with deposits 160 billion. How do you plan to achieve the deposit target?
A: The branches are engaged in active marketing to canvass business. Generous incentives for performing branches and liberal ex-gratia to the staff are offered. The bank is also mulling over stock options. Added to this, we are coming out with new products and services like utility bill payment, enhanced features in our internet and mobile banking services, which will attract customers and help us in achieving our deposit targets.
Source: IANS