Think Beyond, Stay Ahead

"Miracles can happen when you break timelines"

India’s top banker on the importance of speed and technology 

I started my career with ICICI in 1971, and it is in the initial years that I learnt the most. I had two great teachers. The first was SS Nadkarni, who taught me the basics of banking and virtually everything I know about looking at projects and companies. Another stalwart, HD Parekh, stressed the need to focus more on the character of people you are working with than a company’s business or financials. Say, we met in the elevator, he would ask: “What are you doing?”. I would reply and his next question invariably would be, “Who are the people behind this?” And the moment you gave a name — and he would recognise most people unless they were very new entrepreneurs — you could see on his face how comfortable or not he was with the idea. So, your willingness to do business with people has to factor in their credibility, how they have dealt with you earlier and how they have dealt with the system. 

My next round of learning came when Nadkarni became chairman and made me his executive assistant. He would invite me to sit in client meetings. Observing what he tried to understand from clients, taught me much and stood me in great stead later on. It was Nadkarni again who gave me my next push: out of the blue, one day he asked me to go to London. “We should start leasing, so go and spend few months there, understand the business and come back,” he said, adding that he had already spoken with Lazard. So I went to London with no idea what leasing was, picked up the basics, and came back. 

Besides leasing, that stint gave me exposure to technology. For the first time, I saw a company use technology for decision making. When I came back, I told Nadkarni that we were ready for leasing, but I needed a computer. He asked why and I said I wanted it for pricing and other stuff. He said okay and added — I remember this distinctly — “You pick two people, find space for yourself, and then come and talk to me when you have your first Rs.1 crore deal done.” He virtually set me free. I then built the business and we did very well. That was a great lesson in leadership — when you want to test people, give them tasks and set them free, and you will know what they are capable of. I adopted his style in several  businesses we set up later. In fact, when we first went into corporate finance, I gave Chanda [Kochhar, Kamath’s successor as CEO and MD, ICICI Bank] the assignment with an annual target. She executed it absolutely brilliantly and achieved the annual target in one quarter.

In 1985, Narayan Vaghul came in, again an outstanding mind. One day, just before he joined, he called me and said, “I understand Air India wants to lease some aircraft. Are we bidding?” I said no, explaining that we typically didn’t do government business. Also, it was for a large amount and thus far in leasing, we had been looking only at deals below Rs.1 crore. He replied, “Perhaps it’s time to relook at both these policies.” This was another learning — you need to have an open mind to the status quo and be willing to dwell at times on bigger things. 

My next role was to start a strategic planning unit where every morning, Vaghul would spend 20 minutes discussing new ideas and thoughts. Soon, he also gave me the treasury function. So, very quickly I had gone through everything a banker needs to know — project finance, running an independent business, seeing how a CEO actually runs the business and then getting into strategic planning and treasury. 

And then I went to ADB in 1988. Those eight years were completely different, where I studied the history of other Asian economies. Japan was striking and the lesson was that when your currency gets too strong and your wages rise too much, it leads to atrophy. The other observation from the South East Asian context was that there is a distinct aspirational and affordability shift when you cross $500 per capita. You aspire and can probably afford to buy a home, things to put in it, a car and so on. That was a profound learning and it actually shaped what I did at the bank later. 

Technology triumphs
When I came back to head ICICI, there was a looming threat of rising non-performing loans as many Indian companies were unable to withstand outside competition after the opening up of the economy. I had seen that, in several other economies, development banks were facing similar challenges. So my first priority was to raise capital, which we did in multiple rounds. Then, I fixed the organisational equation by bringing in young leadership. The third step was to diversify the portfolio, which at the time was largely term lending. 

In retrospect, merging ICICI with the bank was the biggest decision in shaping the organisation’s ultimate destiny. Simultaneously, I took a huge dive into technology — first, because I was comfortable using technology, but more importantly, we saw no option but to use technology to expand because branch licences were controlled and you could not grow at the pace needed to grow to compete with the established banks. If I remember right, at that point in time, you got maximum 50 licenses in a year. At that rate, it would have taken us 200 years to reach 10,000 branches, which is where our competitor was. “No way,” I said. “Instead, we will roll out 1,000 ATMs in a year.” Frankly, nobody in the bank, except the youngsters in the team, believed we could do it or that customers would embrace the concept. But it worked. And then we put the other pieces together to create a universal bank.

Growing to survive
Our initial strategy of growing the bank by relying on wholesale money wasn’t a conscious decision. It was a survival strategy for us. To survive, we had to merge and when we merged, we had to provide CRR and SLR at the then-prevailing levels on all the liabilities of the parent, which were four times the size of the bank. We evaluated the equation and realised we were confronting a deadly combination — rising NPAs and stalling growth. That’s enough to finish a bank in four or five years. So, there was no option but to grow. 

Given limited branch expansion, we had no choice but to rely on wholesale money, which was also cheap. And it worked, until the pricing equation changed in 2007. But we did exactly what we ought to have done after that. We needed to grow at as low a pace as possible and allow ourselves time to correct the mix of money. Chanda came in 2008, and executed that strategy beautifully. 

In hindsight, perhaps we could have slowed down a bit in 2007-2008 and looked at credit a little more seriously, particularly when it came to unsecured lending. Other than that, I think all the businesses that we built are the foundations for future growth. The rapid growth did give us scale. And with scale come many benefits — the ability to leverage technology, raise capital and create a foundation for growth. 

Sometimes, it is constraints that make you move ahead. I am not very sure that if those constraints hadn’t been there we would have made a big push to build scale or adopt technology.

Hindsight is always right, but what is more important is how quickly you effect course correction when you have realised something is going wrong. Here’s an example. In 2005, we thought the next frontier would be rural and started the rural push. We were too early because technology had not yet become affordable at a mass level. What we had tried to imagine in 2005 was a crude form of Aadhaar, but it went completely wrong. So we withdrew from there. 

I also learnt the importance of speed. I was in New York, to attend a technology conference that McKinsey had organised. I had heard of something called the ‘90-day rule’ where these young start-ups in the US would go from concept to product through beta testing and everything in just 90 days. At that time, we were working on ICICI Direct. The timeline given to me was two years but, in any case, we had no clue how long it should take so we thought that was good enough. I got on the plane from New York, landed in London where it was daytime and found a payphone. I called the team and said our timeline has moved to 90 days from today, not two years. They screamed initially, but they did it. After that experience, we imposed the 90-day rule to so many things. 

The best example was for our US listing in 2000. The investment bankers gave us a timeline of at least 18 months. We said we couldn’t afford that time — I was paranoid that dotcom businesses would collapse. It was a purely selfish consideration: that was my market and if dotcoms go bust and the market dies, my opportunity was lost. We started work around June 1999 and the investment bankers asked how much time do we have. I said, “Ninety.” They said it was impossible, but it happened. The auditors from KPMG had a crew sleeping over here in our office. We opened the cooking facility to feed them three shifts and put mattresses on the floor in the 11th floor conference room. The team lived here and wrote out the prospectus. [NS] Kannan, who is now our CFO, managed the whole process. And on the 73rd day, we listed. I learnt two things from this experience. Timelines are what you set in your mind — they are there to be broken. And once you break them, miracles can happen. 

When I was at IIM Ahmedabad, a professor used a term that’s stuck in my mind — psychosocial moratorium. That’s when you take a break from your current work and do something completely different. In my case, that moratorium is to learn — meet people and discuss stuff that is not even remotely related to banking, learn about technology or anything is not my domain. It’s a good way to energise yourself and learn new things. My philosophy is keep your eyes open and learn. Learn from everything around you.