The leadership change at ICICI Bank is likely to come in tandem with a strategic change in the lender.

Chanda Kochhar will become CEO in May, replacing K.V. Kamath. She will take over at a time when the ability of ICICI Bank’s corporate and consumer clients to service their debts is likely to suffer in a slowing economy, testing asset quality and the ability to maintain earnings growth.

Illustration: Jayachandran / Mint

In her first interviews after being formally anointed the CEO-designate, Kochhar said she would like to pause for breath rather than chase growth right away. There are many implications of this pause: slower loan growth, rebalancing between corporate and individual borrowers, tough decisions of global operations in countries where the bank depends on wholesale credit markets and the like.

All this is not to belittle the frenetic growth push given to the bank by Kamath since 1996. He took over from N. Vaghul when the organization then known as ICICI was close to the edge of major trouble.

ICICI was one of three big lenders set up in the Nehru era to direct credit into a nascent industrial sector. The troika received subsidized funds to finance industrial projects when local equity and debt markets were not deep enough.

This business model was on the verge of collapse by the mid-1990s. The tap for cheap funds was turned off as part of overall economic reforms. And most of the industrial projects that had received the money were wobbly. Peers IDBI and IFCI tried to struggle along the old path, and either stumbled or fell into a ditch. Kamath realized early on that the road itself would lead ICICI towards a dead end.

ICICI Bank’s manic growth push can be traced to those trying years. Huge growth in new businesses—especially consumer lending—helped quickly reduce the proportion of old industrial loans in the overall balance sheet. Kamath flanked his growth strategy with central risk management, intensive use of technology and rapid roll-out of products and new business lines (Kamath admired the 90-day rule of Internet start-ups: three months to move from concept to delivery).

Breathless growth was bound to create strains within ICICI Bank. The troubles at role models such as Citigroup cast a shadow on the universal banking model that Kamath admires. These are the issues his successor will have to grapple with.

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