‘After consumer credit, rural lending is the next big opportunity’

From the 10th floor of the ICICI Bank building in the Bandra-Kurla Complex in Mumbai, the bank’s managing director and chief executive officer K.V. Kamath can a large expanse of urban India the target set for the bank to borrow from and lend to. But, when we met him recently, Kamath was looking beyond, at tracts of India that have been less visible, even invisible, in the Indian banking story.
If consumer credit was the growth vehicle for banks in the last decade, rural lending will be going forward, he maintains. In the last four years, the bank’s rural portfolio has increased from Rs 6,000 crore to Rs 16,000 crore, and it’s looking to increase it to Rs 30,000 crore. In a wide-ranging interview to Clifford Alvares and Gautam Chikermane, Kamath explains what the bank is doing to make this work.

The India story has suddenly taken off.

The signs were there. Till about 2000, corporate growth was tepid. The knowledge revolution started in 1994-95, but people were sceptical. Still, you could see the momentum building up. From then till about 2000, corporate India grew at 5-6 per cent a year and it restructured. We didn’t know how things would turn out.

That’s why you focused on retail.

That’s when we said we need to change direction and have something to keep us going for the next two years. We saw consumer credit as the opportunity that would give us the momentum. Initially, our consumer credit grew at 50 per cent compounded on a small base. We’ve grown bigger, but our businesses are still growing 35-45 per cent.

Around 2001, for the first time, corporate India started becoming competitive. By 2003, it was apparent this competitiveness was here to stay. Corporate India is happening. If it grows, banks grow. In order to build domestic scale, the next big opportunity is rural, which we are now articulating.

Public sector banks have not been able to service rural lending adequately. Yet, you are talking about it as a growth area…

We are doing everything differently, like we did with consumer credit. We need to see where that market is greater and how we can build it up. A key difference in our strategy is rural branches. Other branches are seen as deposit-mobilising outlets. In rural areas, we are basically looking to lend.

It’s a myth you need branches to lend, as has been borne out by the consumer credit experience. We have to work with partners, otherwise costs become prohibitive. There’s an array of partners. In fact, you have more partners in rural India than in urban India.

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