Chadha: We were prudent in staying with the prime customers—both in the personal loan and credit card segments. Despite the temptation to go for market share, we positioned ourselves in the niche segment. The fact that we are a young player and stayed at the upper end helped us control delinquencies. We are conscious of the rise in delinquencies in the unsecured loan segment and our delinquencies are well below the market. This is largely on account of the composition of our portfolio.
Gunit Chadha
CEO, Deutsche Bank, India
On the corporate banking side, we have focused on midcaps to provide growth capital. Even while there is stress on operating margins of mid-cap firms, we continue to tap into diversified sources of capital for these corporates, be it debt, equity or mezzanine debt. Additionally, there is a serious focus on providing risk management solutions to mid-cap corporate India.
Sanyal: We were present in both mortgages and auto loan segments. For the past two years, we have been de-emphasizing those portfolios. Today, that has proved to be a right strategy for us.
We were also in the personal loan segment but we are not looking to grow that business now. In times like this, we have to be a niche player. Our base of retail banking comes from the acquisition of Bank of America. The customers were at the top end and our NPAs are the lowest among the industry.
How do you derisk your bond portfolio?
Nayar: We run a well-focused, analysed trading portfolio. Our trading book is always marked to market. We don’t make money out of statutory reserve requirement. We carry shorter duration bonds.
Chadha:We are sitting on tradable and liquid inventory and have tried to shorten the duration of our treasury book. There are limited steps you can take as this is a market phenomenon.
Sanyal: In the declining interest rate regime, we benefited. In an high interest rate environment, we will take a hit. Indeed, we are moving to shorter maturity bonds.
How have you handled the mark- to-market losses that your clients have faced on account of sale of derivative products?
Sanjay Nayar: We are one of the biggest players in the derivatives business in India. Three years ago, we took a clear stance that we are only going to sell derivatives if the client is doing it as a normal course of business. We have several levels of approval for such deals and that has paid off. We lost a lot of business when new players came in sometime back, but now clients are coming back to us. Our salespeople are advising clients on what to do with their current derivatives book and asking them not to do anything hasty, as a knee-jerk reaction in the present scenario.