Top bank targets Indian rural expansion

India’s leading private lender plans to push further into the country’s vast hinterland in search of growth and new customers, the bank’s chief executive officer has told Emerging Markets in an exclusive interview.

ICICI Bank, which is already well represented in India’s leading cities, now plans to plant its flag firmly in the country’s towns and villages. “Rural expansion is a big part of our future growth plan,” Chanda Kochhar said.

“We plan to expand our distribution network across the country, setting up new branches and inventing new products directly relevant to rural regions.” She said one example of this was a systematic push into mobile banking, a service widely adopted in sub-Saharan Africa and which “would slash the cost of banking in rural India”.

Boosting financial and economic inclusion – a key theme of the ongoing Asian Development Bank conference in Delhi – is vital in a rapidly urbanizing and increasingly unequal country.

A 2012 Bank of India report found that three quarters of India’s 89 million farming households had no access to formal sources of credit. The same report found that 41% of all Indians remained “unbanked”, 61% of whom lived in rural areas. Financial exclusion is highest in poorer northeastern provinces like Assam, Bihar and West Bengal.

Kochhar said that her bank would continue to boost its presence in Indian cities, while continuing to expand its overseas operations. “We want to see growth created across all sectors, from mortgages on the retail side to corporate loans on the wholesale side. Another area we are planning to push further into is banking the country’s [growing army of] small- and medium-sized enterprises.” ICICI last week posted a 21% year-on-year rise in profit for the quarter ended 31 March, while boosting net interest income by 22%.

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While insisting that India’s core economic conditions “remained strong”, Kochhar pointed to key challenges facing Asia’s third-largest economy. Widening fiscal and current account deficits were a growing concern, she said, while infrastructure remained a top priority for India’s government and lenders. Many banks have been burned by infrastructure investments in recent years, notably in the country’s notoriously chaotic energy industry.

At this point in time, Kochhar said, “it’s all about achieving full closure on projects. The problem at the moment is that the last mile of most projects just isn’t being completed. And that is slowing down the pipeline going forward.”

Investors are not the only ones to step back from the infrastructure space. ICICI Bank, one of the most aggressive investors in Indian power plants over the past decade, has no plans to plough money into new power projects going forward.

Kochhar said that attitude was representative of India as a whole. Lenders and investors would return to infrastructure in time, she said, but added: “Clearly at this point in time there is a wait-and-see approach with investors. It’s not a lack of long-term belief in India’s growth story, but there is [a sense that] we need to get some of the roadblocks [out of the way] first.”


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