NDTV: From the recommendations you have got from McKinsey and from your own understanding, how are you position IDBI now?
Yogesh Agarwal: Our aspiration is that by 2011 we want to be 5th largest bank in the country. Keeping this in mind we have developed a plan looking at various business strategies. In terms of business growth it is not possible for us to move from seventh largest bank to fifth largest bank from pure organic growth. So there is a gap and we need to fill it up with inorganic growth. IDBI is clearly the center around which we believe that public sector mergers will take place because we are the only bank in the country which has the unique experience of two mergers so we know what it takes in a likely merging entities. Moreover, we have also want to be a universal bank. In short we are looking at corporate as our strength and retail as our requirement.
NDTV: There doesn’t seem to be a will and ability within the public sector banking space to get this inorganic expansion going. Do you see that environment changing for you to be able to execute this vision through inorganic growth?
Yogesh Agarwal: Quite clearly the finance minister has been saying that he would prefer mergers to take place within the public sector banking. But I think where the movement has not taken place is that finance minister favours voluntary mergers. The government has been nudging the public sector banks to go in for merger but the nudging has been gentle so it needs to be more overt for mergers to take place.
NDTV: Can you tell us that going into the new financial year, how are new business segments like private equity and life insurance, will contribute to the profitability of IDBI.
Yogesh Agarwal: Going forward in the current year, the two new businesses that we are focusing on, are life insurance, and private equity. IDBI Fortis Life Insurance, a joint venture between IDBI and Fortis, is in business from March and we have done pretty good business and moreover the response has been tremendous. This year should also see IDBI positioning itself as a strong player in the private equity market. On the regular side the SMEs and agriculture verticals should see very strong growth in the current year.
NDTV: What is the plan going ahead for your existing subsidiaries?
Yogesh Agarwal: There is no one prescription for all but quite clearly we are looking at the performance of individual entities. IDBI Capital of course will become stronger but for IDBI Homefinance Ltd we are mulling over various options to see that how exactly we should restructure our home loan business. IDBI Gilts, which was set up as a wholly owned subsidiary of IDBI to undertake Primary Dealer [PD] business, should be doing well in the near future. At the moment I can only say that we are looking at all the options and you will see some revolutionary changes in their functioning in the current year.
NDTV: Is the timing right for taking them to list separately?
Yogesh Agarwal: This is also one of the options that we are mulling over and we’ll take a view in the current year.
NDTV: Going into next financial year what sort of capital requirement do you have for IDBI’s new businesses?
Yogesh Agarwal: At the moment IDBI is very comfortably placed in terms of capital requirement. We have a capital adequacy ratio (CAR) of nearly 14 per cent but it doesn’t make good business sense. In the next year we will definitely need large amount of capital and we are already in talks with government of India whereby we are discussing various options. The government has clearly demonstrated that it will not come in the way of capital requirement of the bank. In the current scenario I am unable to disclose more but there would be headrooms and I am hopeful that the government will be supportive of that.
NDTV: There are also investments within the IDBI portfolio that you could unlock, which everybody calls jewels in IDBI’s portfolio,
like holdings in NSE and ARCIL. Are you going to hold them or eventually offload them?
Yogesh Agarwal: In NSE as per the SEBI regulations we are already down to 5 per cent, but you are right we have jewels in our portfolio. And I think family jewels like these come in handy in hard times. Going forward we have the reason to feel that IDBI won’t need to encash most of these initiatives. But there is no one size fits all strategy and we are reviewing our portfolio.
NDTV: In terms of consumer lending business, will the next year going to be relatively different from the high growth years that we have seen in the past?
Yogesh Agarwal: When you talk of credit growth for the next year I would like to say that we have to disaggregate into two different segments namely corporate and retail sides. On the corporate side we are seeing a very huge amount of plans and financial closures being drawn up by corporates. I am expecting quite robust credit growth on the corporate side in the consumer lending business. On the retail side the interest rates have again been said to be culprits. But in my view, the slowdown on the retail side is not due to the interest rates but it is more due to unreasonable exuberance on asset prices side.
NDTV: Given the inflation scenario at national and global levels what is your outlook for interest rates?
Yogesh Agarwal: See what little I have understood of the interest rate is that the main priority for any regulator is to fight inflation. With inflationary pressure building up in the Indian context I really don’t see that the government and the regulator will see their position clear to bring down the inflation.