Bank May Grow at 25 Percent a Year in India – Chanda Kochhar

Chanda Kochhar, chief executive officer of India’s second-largest lender ICICI Bank Ltd., comments on the bank’s expansion and fund raising plans. Kochhar spoke today in an interview with Bloomberg Television at the World Economic Forum in Davos, Switzerland.

“Growth is getting driven by domestic consumption and by the investments that are taking place. As our GDP grows by 9 percent per annum, banks like us can grow at upwards of 25 percent per annum.

“The approach would be to grow organically and that’s why the plan to add about 500 branches every year. But along the way if you come across a great opportunity, at the right price, that makes a good amount of cost benefit sense, we would grab it.

“Currently we are very comfortable on equity. We are operating at a capital adequacy ratio of almost 20 percent, which is probably the highest amongst the various banks in the world. So we don’t have any immediate need to raise equity capital.

“But we do keep raising debt both domestically and internationally. Last month, we just finished raising $1 billion of debt from the global markets and whenever the timing is right we would keep raising funds.”

World leaders speak on more collaboration to address challenges

The international community should focus more on long-term structural changes to deepen collaboration among stakeholders, said the co-chairs, including India’s Chanda Kochhar, at the World Economic Forum Annual Meeting 2011, being held here.

Klaus Schwab, founder and executive chairman of the WEF, warned of ‘global burnout’, as the world focuses on reacting to crises as they happen rather than on actively addressing challenges.

‘We are all optimists here, but when we look at the big issues on the global agenda, there is pessimism. We don’t want this meeting to be one of despair. You fight possible burnout with renewed self-confidence.’

This should be ‘a meeting of constructive optimism’, Schwab was quoted as saying in a statement released on the WEF official website.

‘We are at a turning point,’ said Paul Bulcke, chief executive officer (CEO) of Nestle, Switzerland, and WEF co-chair.

‘There is growth in the world. We have to go forward to basics. The role of economies has always been to create value for society at large,’ he said.

The theme of this year’s annual meeting, which opened in Davos Wednesday, is ‘Shared Norms for the New Reality’ of the post-crisis world.

Another co-chair, Chanda Kochhar, managing director and CEO of India’s ICICI Bank, said: ‘This is a more volatile world. We have to get used to managing businesses and country policies taking into account the higher volatility.’

‘The world is becoming a dual-speed economy, with emerging markets growing faster than developed countries. This rebalancing is throwing up a new set of opportunities for everybody. We must understand these opportunities so we can capitalise on them, Kochhar said.

Fellow co-chair Yorihiko Kojima, chairman of Japan’s Mitsubishi Corporation, said: ‘Many things separate us but we have to unite as global citizens to address issues that are important not only for now but for generations to come.’

Ellen Kullman, CEO of DuPont, US, and another co-chair, said the world’s population would surpass seven billion people this year,

‘We are going to need to work together across national boundaries to get the right answers’ to global challenges, she said.

Jacob Wallenberg, chairman of Investor, Sweden, agreed with her, saying:

‘We need to see more collaboration, more dialogue between stakeholders, which is what Davos is all about.’

Earlier, Russian President Dmitry Medvedev delivered the opening address at the WEF meet, just two days after the deadly terrorist attack on Moscow’s Domodedovo airport that killed 35 people.

‘All our efforts to further develop the world economy will be for nothing if we fail to defeat terrorism, extremism and intolerance, if we fail to eradicate altogether these evils which are the greatest danger to mankind,’ Medvedev told some 2,500 participants in the opening session.

Medvedev also outlined his government’s plans for modernising the Russian economy and enhancing Russia’s global competitiveness.

‘Russia faces many difficulties in building the rule of law and creating a modern economy. We are moving ahead in fighting corruption and modernising the judiciary, though we have not yet achieved the best results from our efforts.’

He spoke about his commitment to technological development and the importance of attracting talent to Russia.

‘Our task is to turn Russia into a more attractive place for the best minds in the world,’ Medvedev said.

‘Russia is an open country that is already part of the world economy. Governments should listen to what people have to say,’ he said. ‘When authorities don’t meet the aspirations of the people, there will be a sad outcome. They will face chaos and instability.’

Earlier, Micheline Calmy-Rey, president of the Swiss Confederation and federal councillor of foreign affairs, welcomed the participants, saying:

‘The gap between rich and poor is growing without relent. Global justice is a prerequisite for sustainable development and we have to understand that our lifestyle is not sustainable.’

The international community should ‘guarantee that resources are distributed in a way that benefits those who are most vulnerable’.

She called for the creation of a ‘sustainability council’ at the UN. ‘The world is so fragile, so let’s take care of it.’

Basel III will pose a significant challenge to banks to do business: Kochhar

ICICI Bank’s MD and CEO Chanda Kochhar spoke about how the latest revision of the Basel III regulations, which looks at the capital and banking regulation guidelines.

Below is averbatim transcript of her interview on CNBC-TV18. For complete details watch the accompanying video.

Q: Will the new banking regulations pose a significant challenge to banks across the globe?

Clearly, it will impact the ability of banks to do more business given a certain amount of capital because there are going to be lower leverage ratios and maintenance of higher liquidity. The amount of business that one could do in the past with the given amount of capital will now be much less.

In the calendar year 2010, we actually saw most of that liquidity coming into the emerging markets. Therefore, we saw healthy inflows even in India. In the year 2011, you may actually see more balancing across the developed economies and emerging economies because a lack of bad news from the developed economies means that some amount of capital flows could actually just remain there.

ICICI Bank-Vodafone Essar ink pact for financial inclusion

 

ICICI Bank Ltd, India’s largest private sector Bank and Vodafone Essar Ltd, one of the largest Mobile Network Operators in India announced a joint initiative to drive financial inclusion in the country. Under this tie-up, both entities will offer a bouquet of financial products such as savings accounts, pre-paid instruments and credit products through a mobile phone based platform.

This partnership is expected to bring the un-banked and under-banked population into the organised financial services framework and assist in furthering the electronic payments market in India. ICICI Bank will leverage the distribution strength of Vodafone, which manages over 1.5 million retail points for acquiring customers and servicing them.

The Reserve Bank of India (RBI) has over the past few years come out with various measures to facilitate banks to achieve the financial inclusion agenda. RBI has allowed banks to appoint for-profit’ companies as Business Correspondents (BCs). This tie-up between ICICI Bank and Vodafone is a step in that direction.

The Indian government has been actively pursuing the agenda for inclusive growth to ensure that benefits of the exponential growth phase reach all the sections of the society. To this effect, financial inclusion has been an important goal that aims to provide access to basic financial services to each and every individual across the country. Such access is essential to initiate growth in the hitherto un-banked sections of the society, eventually resulting in improvement in the per capita household income and the Gross Domestic Product (GDP) of the country.

Speaking on the alliance, Ms. Chanda Kochhar, Managing Director & CEO, ICICI Bank Ltd said, “We are very excited about the partnership with Vodafone, which will help ICICI Bank in deepening its base within the country. Mobile penetration is growing exponentially in the country of which the rural market forms a major contributor. There is a huge potential for offering mobile banking in these regions, which will facilitate access to the financially excluded parts of the society and ensure that benefits from various welfare and growth programs of the government reach them along with other financial services and products. Vodafone, with its innovative and customer focus initiatives, is an ideal partner who will help in furthering the cause of financial inclusion in India”.

Mr. Marten Pieters, Managing Director & CEO, Vodafone Essar, commented “the RBI move to allow for-profit companies to be Business Correspondents is a welcome move that will enable the population better access to financial services. With our reach and ability to connect to customers, we are uniquely positioned to aid the financial inclusion agenda of the Government of India and RBI. We are pleased to work with ICICI Bank, which has always strived to offer innovative products to its customers.”

Both parties will work out the specific arrangements in the coming few weeks and chart out a go-to-market plan.

As per the Reserve Bank’s guideline, banks are allowed to engage retired employees, ex-servicemen and retired government employees and other entities, as prescribed by the central bank, as business correspondents.