DSIJ Interview With Pankaj Sanklecha Chief Financial Officer & Head – Corporate Centre IDFC FIRST Bank.

"Financial discipline is important for growth to be effective and value accretive"

Pankaj Sanklecha 

Chief Financial Officer & Head – Corporate Centre IDFC FIRST Bank. 

What are your key priorities as the CFO of IDFC FIRST Bank?

Our strategic priority is to enhance corporate value by investing in the right businesses, communicating transparently and maintaining high corporate governance - all of which, we expect, will add value to shareholders.

How has the merger of IDFC Bank and Capital First Ltd paved the way for the growth of the bank?

We have created a new bank IDFC FIRST Bank because of the merger, with a new business proposition mostly focused on retail, with a very unique positioning.

The erstwhile IDFC Bank had a strong banking platform, which is critical for continuous supply of funding lines, has branches platform that can be scaled up, has network, strong payment systems and a corporate lending book. Capital First brought in capabilities of growing retail loans, powered by unique and robust underwriting processes, low NPA levels, strong monitoring, and a young motivated workforce. The FY18 net profit was Rs. 328 crore, growing at a 5-year CAGR of 55%.

Thus, the two great organisations, with their expertise in respective businesses which are fairly complementary, have come together to provide very strong propositions for all their stakeholders, including customers, employees and shareholders.

In terms of corporate governance, both the entities have been top notch.

Under the new identity, the bank would now focus on growing its retail liabilities and retail assets, which would lead to improvement in profitability ratios with scale, going forward. The high capital adequacy of the bank with tier-1 capital of about 14% would effectively support these growth plans.

How is IDFC FIRST Bank able to encash the digitisation trend in the economy?

IDFC FIRST Bank is well-placed to cater to its customers digitally. For our retail deposit customers, processes for account opening, transacting and operations, are powered by technology. As far as retail lending is concerned, Capital First has brought tried and tested efficient technology driven processes. Even on the corporate banking side, again the bank has excellent tech platforms.

Under the new identity, the bank would now focus on growing its retail liabilities and retail assets, which would lead to improvement in profitability ratios with scale, going forward. The high capital adequacy of the bank with tier-1 capital of about 14% would effectively support these growth plans. 

What is your take on the liquidity crisis in India? How long do you think the crisis will persist? 

As corporate governance issues and financial stability problems have surfaced for a few companies, debt providers have become very cautious with respect to fresh disbursals. Apart from corporate NPA cycles, there is also an overall slowdown in the economy, especially in key sectors like auto. But thankfully, the RBI has infused liquidity and the surplus is now over Rs. 1 lakh crore. This situation would settle in due course. At our bank, we have a lot of liquidity, our LCR is comfortably above 100%.

Can you comment on the bank's interest on expansion of its consumer outreach and new product initiatives?

With the consummation of the merger, the bank now has a wide array of products for consumers. Apart from the usual banking offerings such as savings deposits, banking transactions, corporate loans and prime home loans, the bank now provides a wide range of retail and consumer products.

We understand that our CASA is very low at 15%, and only about Rs. 10,000 crore because we are a new bank. Other good banks are at 40% plus. So we are advertising mainly for liabilities as that is our primary need.

For rural consumers, the bank has several products, including joint liability group loans, equipment financing, two-wheeler financing and other such products. We are growing well on all these fronts. On wholesale loans, we are consolidating and reducing the book for now. We can grow again once CASA is fixed.

Our vision is to create the world's best  bank, right here in India, for aspiring consumers and entrepreneurs.

What is your outlook on retail banking in India?

Retail banking in India is set to grow stronger in the future. With the prolonged corporate NPA cycle hurting overall economic growth, a lot of banks have strengthened their focus on retail banking. As the economy grows, even at 7%, there will be a lot of demand for consumption, retail and even for MSME. Retail banking has to grow, and it will.

How has your experience been as a CFO of IDFC FIRST Bank? Can you highlight the key challenges that a CFO faces while leading a private sector bank?

The experience has been quite fascinating for me as the CFO and Head - Corporate Centre of IDFC FIRST Bank. This is especially so in the context of the merger. The initial phase of the merger entailed crucial areas of work, including but not limited to, alignment of people and business segments, and integration of processes and technology, to maximise efficiency, not to mention the charting out of future strategies from a finance and control perspective.

Working with an incredible team and the immense support from top management helped handle challenges and successfully achieve the desired objectives.

In general, for a large private sector bank in India, governance and financial control are the two critical success factors which can help the organisation grow sustainably in the future.

While supporting the business growth of the organisation is crucial, the more important factor for me is to continue to have financial discipline so that growth can be effective and value-accretive to shareholders.

What is the best part of being a CFO at IDFC FIRST Bank?

IDFC FIRST Bank is practically a new bank with a new strategy and a new team in place. Although the bank is reasonably large in size in terms of its assets and people, it is just about to begin its journey towards becoming a bank with a retail-focused business model, high corporate governance and profitability. Being a part of this journey from the very beginning as the CFO is a fascinating experience.