Many banks are witnessing a lot of changes at the senior level. But the pool of candidates for top positions appears very thin. Why is this happening?
Succession planning is a problem across Indian industry. It is not limited to private banks. But yes, how many banks build up their cadre? Among the government-run banks, State Bank of India does a fine job. The reason it does not happen elsewhere is that there is a cost to it. So that is an issue.
Banks need to do it, and perhaps they now realise the need to do so. They all thought this was easy, but now customers have become demanding and their needs are multifarious. Some banks are doing it and concentrating more on customer service, and their shares are gaining tremendously. Those that miss out on customer service and succession planning will lose out on their market capitalisation as well.
Specifically, on HDFC Bank, how do you assess developments since you resigned in March?
I will only say they have a strong franchise, a set of high-quality group companies, strong assurance teams and competent middle and junior teams to lead them along. I wish them the very best.
Where do you see the challenges coming in the Indian banking sector?
It is the dip in household savings. When household savings are falling sharply, the avenues for banks to mobilise deposits get clipped. So, for banks, where is the scope for the buildup of liabilities? Looking ahead, the fact that the liability book is not growing is a basic concern for banks, crimping their desire to ramp up assets, including loan growth.
What are the ways to sort this out? One of those is ramping up the quality of customer service. I’ll put it this way: When a person goes to a bank through any mode, he wants his deposits to be renewed and his money to be moved very quickly. Essentially, what he wants are simple things, like a transfer done very quickly and things related to his money in the bank to be looked after. That also means protection against the risk of cybercrime, all of which are a big deal.
Only then should the sale of other products be introduced. So these other products shouldn’t take precedence over the business of reposting the money or capital that he has entrusted to them. That is the main thing.
You mean the sale of third-party products like insurance?
Yeah, there should be a shelf of those. After all, they are also distribution franchises, but they cannot take precedence over the basic banking requirements.
In this context, the depositor also looks at the return his deposits generate. I am thinking about the taxation regime for fixed deposits. Ultimately, banks are a channel for people to get some long-term return, and this means banks also need to adjust their asset-liability mismatch. They also need long-term deposits, say those of three-five years. How would they get them if returns on those deposits do not climb? Otherwise, the housing sector will not be supported. How would you…
Read More: ‘Banks that neglect customer service, succession planning risk mkt cap hit’
