Mumbai: Pramit Jhaveri, 47, took over as Citibank India Ltd’s chief executive officer in April this year.
In an interview with Mint, the 23-year veteran of Citi talks about the lessons learnt from the past and sketches the bank’s business plans in India. Edited excerpts:
Six months in charge of Citi India. How has it been?
We have a really good platform in terms of the length and breadth across investment banking and retail banking. There is so much to do... Our brand is very powerful and it’s a great opportunity for us to participate in a growth market where we are very well positioned and all the building blocks have been laid.
Last year was a difficult year for foreign banks in India. The Reserve Bank of India (RBI) data show marginal growth in loan assets. Has the cycle turned?
The facts speak for themselves. So, I am not going to question the figures. I can speak for Citi. The problems and issues that you are referring to do not relate to our global problems; these issues are very specifically related to India—on the retail banking side. Notwithstanding the global problems that the industry had faced, our corporate and investment banking businesses in India had no problem at all and the data that you’re talking about were mostly led by a very conscious consolidation in retail banking, very specific to India.
Why did it happen?
The problem was largely limited to consumer finance. There were two or three issues—everyone was in the quest for marketshare and growth. There was a certain compromising in traditional origination and underwriting standards in the quest for growth and, in addition to that, the absence of credit bureau and the related infrastructure contributed to the problem.
Straight talk: Jhaveri says some corporate lending practices, owing to abundant liquidity, are still a cause for concern. Abhijit Bhatlekar/Mint
Is everything fine now?
Absolutely. We are very much in the frame of growth; we are looking to grow and we are seeing a lot of the reversals of the provisions that were taken earlier. If you look at any of our businesses, the cards business, the branch banking, mortgage—all of that, on a month to month basis, is growing.
Can you give us some numbers?
In November-December 2009 our cards business was adding net 5,000 cards a month. In August and September 2010 we were adding 20,000-plus. That’s a very significant change. Mind you, it’s not a number game alone.
At the end of the day, what matters is the target market and whether we are able to reach there. In terms of volume, we have 11% market share in credit cards but our market share in spends is over 20%, the highest in the industry. We are quite pleased with our market share and our gains and the add(ition)s that we are having every month.
So, you are back on the growth path?
Our balance sheet was kind of flat for two years and this year it will grow upwards of 25%—a very significant number, driven by client and customer led growth across all businesses.
You seem to be doing pretty well in investment banking.
In the last three weeks, we have just completed a $750 million equity issue for Tata Motors Ltd, $1.5 billion US bond for Reliance Industries Ltd, a retail bond of State Bank of India—the first retail bond by an Indian bank—and Coal India Ltd’s initial public offer. These transactions speak of the strength of our platform—domestic equity, international equity domestic debt and international debt.
Is credit growth on track?
Most banks are projecting advances growth of around 20% this year. The credit growth has been a little bit subdued, but I think it is sector specific and we are seeing signs of a pickup in economic activity, capacity creation, a pickup in capex and we feel pretty good about our advances growth on the corporate side. Our balance sheet will grow 25%-plus.
Any lessons from over-aggression in the retail space?
We have learnt from the mistakes and we want to have a very clear target market and a clear strategy within the target market, sharp originations and underwriting standards. On the corporate side, fortunately there were not too many mistakes that took place and India emerged relatively unscathed from the global crisis; but there is no reason that we should not learn from the mistakes of others globally. Aggressive extension of credits, high leverage rates, weak security and credit standards, weak packages…these are all mistakes that took place globally and we have no desire to commit them in India even though we are in a period of good growth. We want to have a very good mix of client-led business and trading business, and today, it’s about 85% client-led and 15% trading—a very healthy mix.
And there is this whole theme of responsible finance which our CEO Vikram Pandit has been a strong advocate of.
Any new focus areas?
Our business in India is well rounded—investment banking, corporate and SME (small and medium enterprises) banking and retail banking. We don’t need to create new businesses—it’s all about execution and taking advantage of the platform we have and global distribution. We are constrained from a branch point of view, but there are many ways to mitigate or overcome the physical absence of infrastructure.
If you visit Gurgaon, where we have one branch, you’ll find Citi’s presence in 700 points through ATMs, restaurants, malls. Technology is a great facilitator for that. We added more than 150 ATMs this year, that’s a big number for a foreign bank.
Are Citifinancial’s troubles over?
I have been asked this question a hundred times and I will give the same answer for the hundredth time. In early 2009, operationally Citi globally was split into Citicorp and Citi Holdings.
Everything that the company believed was not necessarily core or strategic was put into Citi Holdings. CitiFinancial went into Citi Holdings and at this point of time, therefore, definitionally, it’s neither core nor strategic and we are managing it for value. We are not going to do anything under distress. We are looking at it and we will do what is best for CitiFinancial
Is it up for sale?
We are managing it for value and it’s not strategic; so is something up for sale… There has been a lot of talk in the press… You should actually look at the headlines for the last 15 months on CitiFinancial and see how many of them have come true.
In the last 15 months, 20 newspapers have said it’s up for sale and next week there will be an announcement; so and so has been buying it—how many of them have come true?
You infused some capital into the bank recently.
We infused about Rs 1,200 crore of capital in March… growth capital. If you are growing your balance sheet 25%, you need growth capital. Out capital adequacy is 17.3%... We have not repatriated profit for many years. We are comfortable right now for our growth.
You must be looking forward to the Reserve Bank’s foreign bank policy?
We have had a number of deliberations with RBI through the Indian Banks’ Association and we are extremely encouraged by what RBI is thinking of in terms of wholly-owned subsidiaries.
We are waiting for the regulation and we hope that the regulation will address RBI’s own objectives, which I think are well articulated, and at the same time it will take into consideration foreign banks’ needs in India…
As a foreign bank, what are your challenges in India?
We face limitations in terms of our physical points of presence on the retail side. On the corporate and investment banking side, there are no limitations from that point of view. On the retail side, there are limitations from the distribution point of view. We really like to think of ourselves as a global bank that operates in a market and a country like India as an Indian bank.
How critical is India in Citi’s global growth strategy?
The emerging markets are at the very heart of Citi’s global strategy and if you think about a market like India, it’s got to be at the forefront of the emerging markets. If you look at any Fortune 1,000 global company today, India is very much at the cornerstone of their growth and it is most certainly for us…
You have huge exposure to microfinance institutions. Is there any change in your approach (after recent controversies related to their alleged high interest rates)?
Our exposure to MFIs is not huge by any yardstick. We take pride in our partnerships with microfinance institutions both from a commercial point of view and from a Citigroup foundation point of view. A lot of activities that we have conducted with our microfinance partners over the years have been backed by multilateral institutions …
There is a discussion going on around the microfinance industry and its practices right now. I think there are two issues—regulations and market forces—and both will play themselves out…and we will wait and watch. We are not unduly worried whichever way it goes…
As far as we are concerned it is business as usual.
It seems RBI is keen to encourage existing foreign banks to go for local incorporation. Would you prefer it?
At the end of the day, you have got to look at the guidelines that will come out, the implications if you want to convert, the road map and how smooth it is to convert. I think there are certain issues that need to be resolved in terms of the stamp duty, capital gains, etc.
What about local listing? One of your peers has done that.
This is not something we talk about publicly.
We have made applications to the RBI for incremental branches and some of them are in rural India…we are waiting to hear from them.
You are not innovative enough and you don’t do anything spectacularly different from our home grown private banks.
I don’t agree with you at all. The Indian consumer is incredibly sophisticated and they would not accept us if we didn’t have competitively differentiating products. We have innovation, technology and creativity… Please understand we have 40 branches and yet we have a disproportionate market share.
All these because Indian consumers know that there is a value proposition. Our Internet banking platform is innovation, and also mobile banking… Our transaction banking is fully automated and we move 7-8% of India’s GDP (gross domestic product).
What worries you?
There were mistakes made on the consumer banking side in India and on the corporate and investment banking side globally. Because of abundant liquidity—both in the dollar market and the rupee market—there is some amount of not-sensible practices taking place as far as corporate lending is concerned. That’s an area that worries us. Some standards may get compromised because of the quest for growth and we think it will be unwise not to learn from the mistakes.