Credit where it's due

Technology and a focus on consumer credit have helped chief executive KV Kamath transform ICICI Bank from a tired lender that only tackled project loans to a global bank that has changed the face of the Indian financial services industry. Pooja Kothari reports

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By  Pooja Kothari Published  February 16, 2006

|~||~||~|India’s largest private sector bank, ICICI Bank, is on a roll. On 21st December 2005, it received its license to start operating a wealth management branch out of the Dubai International Financial Centre. This was in addition to its existing representative office in the UAE. A day before that, India’s second-largest bank opened a branch in Wembley, London – its third in 2005 and fifth since it launched operations in the United Kingdom in 2003. ICICI Bank was also adjudged to be the ‘Best Consumer Internet Bank in India’ for 2005, and a few months prior to that it was ranked 43rd in the BusinessWeek annual ranking of Asia’s outstanding publicly listed companies. It was also among the top ten in terms of best shareholder returns over the last year and best sales growth over the past three years. The bank also successfully raised US$1.8 billion through its public offering and the issue was subscribed several times over. This wasn’t surprising given the numbers supporting the ICICI growth story. In the first half of the financial year 2005-06, its asset base was over US$43 billion – second only to the government-owned State Bank of India’s US$104.5 billion. Net profit in 2004/05 was over US$455 million, a ten-fold jump in three years. Post the recent public issue, ICICI Bank’s market capitalisation has crossed that of SBI, making it the most valuable bank in the country. And to imagine that this is the same company that until less than a decade ago was a staid behemoth selling a single financial product. The numbers put the picture in perspective: its asset base then was a mere US$25 million and net profits US$3.86 million. “In 1996, ICICI was a single product company – project loans – given by and large to start-up companies. In today’s context, that would be called a venture capital existence. We were doing venture capital funding using borrowed money, which was just not done,” says K V Kamath, the 58-year-old chief executive officer of ICICI Bank. The bold and ambitious Kamath went about putting the ICICI house in order with avengeance. He took some ‘gut-wrenching’ decisions along the way, be it ICICI Bank’s multi-million dollar investment in building a technology platform to support its services, or its focus on consumer credit in a country where there is not even a credit bureau. Kamath thought big but continued to focus in on the execution. “There are some leaders who are great on vision, but weak on execution. There are others who are excellent at relentless execution, but lack the vision and strategy to think big, and make calls way ahead of the data presented to them. But Kamath has the unique combination of vision and relentless execution in him. For the calls that ICICI took on technology, consumer credit, international growth, and is now taking on rural banking, there is not sufficient data before you; there’s gut and vision [needed] to go for it,” says Kalpana Morparia, deputy managing director of ICICI Bank, who knew Kamath before he became chief executive. The ride to fame hasn’t been easy though. When Kamath took over the helm at ICICI, the Indian economy was still grappling with the forces of globalisation sweeping across its landscape. “Our customers were facing tremendous pressures to perform to survive, which meant that the pressure came onto us,” says Kamath. “At the same time, technology was creating a global shift. The internet was making its presence felt in the world and it was up to companies to leverage the technological revolution.” Closer to home, what Kamath inherited was an organisation very comfortable with the status quo. In other words, there was a lack of employees wishing to move forward and expand their horizons. “I found that youngsters in the organisation were somehow not keeping pace with things happening around them,” he says. This made the challenge of turning ICICI around even harder. “Not only do you have to challenge your own status quo, you also have a marketplace that is very volatile. It’s a very dangerous situation to be in,” Kamath adds. Despite the potential pitfalls, it seemed more like the opportunity of a lifetime to Kamath. Transformation became his motto – be it people, organisational structure, or product portfolio. To shake people out of their comfort zones, Kamath introduced a meritocracy and cleared the path for youngsters to grow. When the need for a golden handshake arose, he took the tough decision of letting go of people he had worked with for 20 years. Kamath also made rapid changes to the organisational structure, even though the existing set up had been in place for decades. Similarly, he tackled the bank’s single product focus. “We needed to widen our product suite. So we first did short term [12 to 24 months] corporate loans, which did exceptionally well. But that wasn’t enough. So we looked at consumer credit and much wider areas of finance, such as mortgages, car loans, credit cards, and so on,” Kamath recalls. There was scepticism all around when Kamath took the lead in product portfolio diversification. “Everyone looked at it with doubt and said it wouldn’t work,” he says. “This sort of scepticism was good because it gave me a clear market lead. It allowed us to execute at speed and build distance before anyone caught us.” Since deciding to diversify, Kamath has proved the doubters wrong. Today ICICI Bank is a retail powerhouse with a customer base of 16 million. It provides a third of all new retail loans in the country and in home mortgages it has overtaken the pioneer HDFC to acquire a US$8.25 billion portfolio. Similarly, it has surpassed Citibank in terms of the number of credit cards outstanding and other private insurers in the country in terms of number of policies sold. However, numbers alone didn’t satisfy Kamath. He used the opportunity to introduce an entrepreneurial culture within the organisation. “As we rolled out our products, we did it with an entrepreneur’s mindset. What does that entail? Essentially, the ability to do things on your own,” says Kamath. What this means in practice is that the ownership of an idea was given to one person, along with “limited support and broad objectives”. The person was then expected to develop it as if it were his or her own. Each of the bank’s businesses have been built up in this manner. “Even today, when we go out to Dubai or the Middle East or Canada, every business is set up in the same way,” Kamath adds. But why the stress on entrepreneurship, especially in an industry that it typically defined by conservatives? “I find that ‘limited resources’ is a good challenge because it puts people on their toes from day one. There is no room for slack and you don’t allow people to become fat. Everyone should feel the pain of being an entrepreneur; every entrepreneur goes through pain and then becomes steel in terms of what she does,” Kamath says. It’s not just the big ideas that have driven the finance house forward. Talk to anyone in ICICI Towers, the swanky glass building in suburban Mumbai, and they will have a story to tell about how particular Kamath is about the way things are done. Secretaries are sure to remind their new bosses about stapling papers vertically before sending them up to the chief executive’s tenth floor office. “He’s the first one to point out if the slightest thing is out of place; even simple things like swinging your chair behind the table so it looks neat,” adds Morparia. This ability to focus on micro-issues, even while seeing the big picture, has been Kamath’s trump card. Nothing is ever ‘happenstance’ with him. Everything ICICI Bank has done has been according to a strategy – a strategy born from a multi-dimensional assessment of the environment. Take the biggest challenge that the ICICI Group has faced: effecting the merger of ICICI Ltd and ICICI Bank. “It looked like a huge mountain to climb,” admits Kamath. While the actual merger happened in 2002, the process for effecting that merger started six years before in 1997. Through all these challenges, Kamath was as demanding of himself as of his team – if not more so. Every year, he declared, “I am obsolete. Maybe so are you. So let’s reinvent ourselves for the next year.” His core philosophy for himself and the bank was one of a challenge to the status quo. “You are evolving all the time because things around you are evolving. Ideally, you should be ahead of the curve. At best, you should be with the curve. If you fall behind, you’ll be out of the game. My personal philosophy, as well as the one we follow at ICICI, is to be ahead of the curve,” Kamath says. This philosophy has manifested itself in many ways. For instance, a year ago, Kamath thought the bank’s branches were looking too busy. “This branch is looking like a fish market. We aren’t in the fishing business. So what do we do?” he asked. The conventional reply was put forward – more space and more people. Not satisfied, Kamath challenged further. The result was 40% efficiency improvements in the branches due to process changes alone. To achieve this Kamath looked outside his industry for inspiration. When he came across technology companies, he observed the speed with which they got built, and asked himself why his in-house tech projects couldn’t be built at the same speed and scale. Kamath’s simple management mantra: “You challenge people, and suddenly things fall into place.” The late Dhirubhai Ambani, who single-handedly built Reliance Industries into one of the top conglomerates in India, is the inspiration behind Kamath’s love for challenging people. Kamath knew of Ambani’s visit ages ago while Reliance’s refinery was being built in Jamnagar in Gujarat. On a visit there, Ambani noticed the quiet at 10pm at night, and supposedly asked his son why there wasn’t any work being done. When the son pointed out the time of the day, Ambani said, “So what? Can this implementation not be done in two or three shifts? What is so critical that it has to be done only in daylight?” Years later, during ICICI Bank’s infrastructure implementation, the company faced the problem of limited branches serving an exploding customer base. Kamath asked his team “why not run them from 8am to 8pm six days a week?”. “No one accepted it. They said customers won’t come in. But I refused to buy it. I said all our branches are going to be open 8am until 8pm. Today, everyone says that is the defining difference between us and others. We have a four year lead, which cannot be overcome easily,” says a proud Kamath. Ambani also told Kamath, “When you change orbits, there is always friction.” It is something Kamath always keeps in mind – more so today because whatever he does now becomes an orbit in itself||**||

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