‘Interest rates will come down’

Romesh Sobti is the managing director and CEO of IndusInd Bank — one of the leading new generation private banks in India. With 33 years of banking experience in large state owned and multinational banks, including ANZ Grindlays Bank and the State Bank of India, Mr Sobti feels that interest rates will come down from September and the government should increase its spending in the infrastructure sector to beat the global economic slowdown.

Mr Sobti, who has taken over as CEO of the bank about 15 months back, plans to take the bank’s customer base to three million in the next two years.

Excerpts from an interview :

The finance minister has been asking banks to take cue from RBI and cut interest rates. How do you think the banking industry would respond to it?
The interest rate will come down. Then, the question is how inflation will move. From September, we will see a reversal in interest rate. In fact, in our budgeting we factored that the interest rate will start moving slightly from the third quarter onwards.

How do you see the credit off-take in the industry?
The global economic slowdown has had its own impact on the Indian banking industry. It is true that the industry was facing deterioration of asset quality, slower credit growth and margin pressures. However, the interest rates have come down and the demand is gradually picking up. The fact is that over 90 per cent of the loans given are below the prime lending rate.

If this is true, why is the SME sector complaining about the reluctance of banks to fund them?
After the global slowdown and the collapse of several banking giants in th US and the UK, the banks had become risk-averse. Banks will not put good money after bad money. Now this is gradually changing. Credit-off take is going up. In our case, unless we see any irregularity, we feed our customers and in all deserving cases we restructured the repayment schedule. All banks are doing the same.

In this backdrop, do you think the new UPA government could get the economy back on the growth path?
The previous UPA government had come out with a number of stimulus packages. The new government should increase its spending, particularly in the infrastructure sector. We expect more measures to be taken on the fiscal side to create consumer demand.

How big is your retail book and do you have any plan to grow aggressively on this front?
Our retail portfolio is Rs 7,200 crore. It is mainly in commercial vehicles, two-wheelers and construction equipment. We hope that this will grow at least in line with the market growth. We don’t have any plan to enter into new areas this year.

Do you have any plan to raise additional capital in the current fiscal?
We are well capitalised and have enough room to raise additional capital in the current fiscal. We raised Rs 100 crore Tier II capital in March and are planning to raise further Tier II capital in this fiscal in two trenches — in the second quarter and the third or fourth quarter.

There are reports about a brand change. Is it true?
There is no truth in that. Firstly, we want to change internally in terms of better service, better products and better management. We can change our name tomorrow, but before that we will equip ourself to take up the new challenges to take the bank in the next growth level and our customers should feel that qualitative changes took place in the bank. At present, we don’t have any immediate plan to change our name.

What will be your growth strategy for the next two years?
Our strategy is to become a universal bank offering all financial products and services under a single umbrella. We have the capability to introduce all financial products and services in the next few years and will have them in our portfolio. We will focus on profitability, productivity and efficiency.