“I am very bullish on corporate credit”

Chanda D Kochhar, managing director and CEO of ICICI Bank, spoke to Moneylife’s Sucheta Dalal and Debashis Basu on the Indian macroeconomic environment and the thrust areas for the lender. This is the first part of a two-part series 

Sucheta Dalal & Debashis Basu (ML): There is a world of difference between the state of financial markets when you took over and now. You started out shrinking the bank and cutting back on retail, what is the strategy now?

Chanda D Kochhar (CK): Yes, at that time we had what we called the '4C' strategy. Each of the Cs stood for - consolidation, getting more CASA (current account, savings account) deposits, cost control, containing credit loss. As times changed, we had the option of changing '4C' to a 'G' and say that we are all for growth of the kind we enjoyed before 2008. Instead, what I have said is that we now have 5Cs. While keeping our eye on the first 4Cs, we are now going for credit growth as the fifth C. In that sense, our growth is still a measured growth. So if you talk of credit cards, it's not as if we are not adding new cards. We have consciously weeded out a lot of the credit cards that don't make sense for us from the loss point of view or transaction vis-à-vis operation cost. Mortgage loans are also growing. But again, we are not at the kind of market shares we had in the past, because we believe that the current rates of interest give only a certain return on investment, so we are calibrating our growth but also keeping in mind our final profitability as rates adjust.

ML: What are your thoughts about the real-estate sector today?

CK: Interestingly, mortgages have been very safe throughout economic cycles. The losses, if at all, are due to fraudulent documents. These are very different across different banks because it depends on what their processes are. For us, the loss rate is minimal and continued to be low even when the economy was in a downturn.

ML: Despite the job losses and the stories about young techies booking multiple flats at the same time?

CK: Actually, the young techies never booked six flats with a loan. While they may have wanted to do it, when banks decided to lend, only lend against cash flow. So if we thought that they had income only to book one house or at the most if they were living in one house and they had income enough to book a second, they got the loan only for that. Broadly, most people also continued to retain their job. So as long as they had their job, it didn't matter if they didn't get increments. They had their job and they were living in their home they wanted to continue to pay their installments and not lose their home.

ML: So which are the sectors that are doing very well?

CK: Actually the whole retail lending sector is very stable. Commercial vehicles are doing well, even personal loans and credit cards are doing well. In credit cards, we find that cards issued to your own customers are doing pretty well. We have pruned this business, but haven't got out of it; it's just that in case of new-to-bank customers, we don't want to be stuck with an unsecured portfolio where you really don't know how to trace the customer when there is a problem. On the corporate side again I am very bullish. What is happening is that projects have been finalised and commitments are being made and it's just that the drawdown of loans has been low.  That is because corporates have either raised equities or they are first putting in equities or they are opening some long-term LCs, and so credit drawdown has been slow. But it will soon pick up.

ML: Mr Kamath used to say that for the first time since Independence, all sectors of the Indian economy are doing well at the same time…

CK: That is actually more true now. If you look at the trajectory of India's growth over the past 50 years, from Independence till about the late 90's it was the industrial sector that was mainly pulling India. In the 2000s it was the turn of consumer-led growth. But now both engines are driving the economy. And because of demographics there is a need for roads, ports, airports and so investments have also started happening to build new infrastructure. So one will keep feeding the other.

ML: Do you worry about things like regulatory risks, such as frequent changes in rules, change of rules with retrospective effect?

CK: What I would think is that all said and done, domestic regulatory changes in areas like banking are predictable and stable. In the current economic environment, it is global regulations, such as the kind of capital needed for different geographies that can cause uncertainty. Every regulator in a way is becoming more nationalistic and what you are doing in that country becomes of paramount importance. That means that our efficiency of usage of capital may keep coming down because none of them will take a holistic view of capital requirements; everyone is taking only their particular point of view.

(This is the first part of a two-part series).



Nagesh KiniFCA

6 years ago

The aggressive marketing and foisting of credit cards unsolicitated has been the bane of the CC department which is running round like headless chickens. i have returned four cc cut into half. holding one till i get a no dues confirmation. the first time i put a card in the drop box in mahim branch i was told they have not received it and wanted me to produce a receipt from the drop box. when i wanted to speak to the drop box the manager told me that it doesn't speak, when asked how it could issue a receipt, as a special case he agree to let me have a stamped acknowledgement across the counter. i get a call that they have not received this either. when i refused to make the payment once again they threaten to report to cibil. i told them to go ahead or go to hell. they continue to load interest and the initial three figures has now bloated to four figures. is this a fit case for disha?


In a monster bull market many stocks will rise despite poor performance. Here is a selection by ML Research Desk

The markets are showing no signs of retracement. Foreigners continue to be bullish about the Indian growth story and are pouring even more money in Indian equities. Mutual Funds are raising money by the fistful and retail investors are ready to jump even at these levels regretting what they have missed out. From frontline index stocks to little known micro-cap companies, all have seen a spurt in their market-caps with money from all quarters chasing them and desperate to be a part of the big Indian bull run. But is the buying beginning to look indiscriminate? Is it a case of rising tide lifting all boats, as the saying goes? One way to find that out is to examine whether the fundamentals are supporting such a euphoric rise in stock prices and if not which stocks are rising with the tide.

We decided to test this by screening our universe of stocks for stocks which are actually faltering on performance yet are rising with the  overall market. But first the performance of the markets. 

Starting 1st November 2005 till 14th March 2006 the Sensex gained a total of 2857 points (36%) while the Nifty rose 808 points (34%).  Among other broader benchmarks, the CNX Nifty Junior gained 1483 points (31%) while BSE Mid-Cap and BSE Small-Cap were up 1250 points (33%) and 1246 points (25%) respectively.  This in short reflects the strength of the markets and the interest of investors across the board irrespective of size. 
We ran our stocks database to first check out on the performance of companies at the operational level. From the 1100-odd companies in our regular tracking list we got 842 companies being profitable at the operational level. Many lossmaking companies have risen with the tide. But let's focus on those that are making profits. Being profitable is one thing and improving profitability that matches the rise in share prices is another issue.

Fundamental strength of companies is determined by their capability to raise the bar and clear it in terms of improving growth rates quarter after quarter. Companies that can consistently improve their growth rates are the ones that merit attention in the market and are likely to deliver value to investors.  But then in a market like this, these kinds of arguments hardly matter.

We screened our list of 842 profitable companies to search for those that are showing a consistent decline in YoY growth rate of profits at the operational level. We then set this against their market performance since November 2005. Some 36 of the 842 have seen their growth rate in operating profit continuously decline over the last five quarters. Of these, more than 60% (22 companies) have actually seen their growth rates decline consistently on a basis and yet their market cap has been consistently rising. 

More than 50% of companies with weakening fundamentals but rising market cap came from the mid-cap space. Among others there were three small-caps, four micro-caps, two large-caps and a mega cap company. Here is a brief analysis of why the stock prices of some of these companies are continuously rising despite the fact that their fundamental performance has been continuously weakening over a period of time.
The first on our list is OP Jindal promoted, sponge iron manufacturer, Monnet Ispat. Monnet has been consistently faltering in growth with operating profit declining by as much as 29% in the recently concluded December quarter.  Monnet recently raised US$ 60 million through an FCCB to fund its expansion plans. Faltering fundamental, declining product prices and capacity expansion and yet the market cap? Up 74% between November 2005 to March 2005.  Another steel major that appeared on our list was Tata Steel. As with Monnet, Tata Steel too has slipped in performance at the operational level with growth continuously on the decline. Its December quarter operating profit was down 11%. However its market cap rose 35%. What is keeping the markets interest in steel stocks alive is the expectation of a pick up in demand especially from the Chinese market.  Tata Steel is India's largest integrated steel manufacturer with captive mines for iron ore and coal. However, declining product prices have hit the company hard.

One of the best examples of a speculator driven stock in a market like this is that of 3i Infotech.  Its performance has been on a constant decline with operating profit growth deteriorating with every passing quarter. Yet its market cap has gone up 53%.  From as high as 63% YoY growth in operating profit for QE June 2005 its growth came down to 25% in the December quarter.


SEBI’s retrospective multi-fold salary hike for employees unleashes widespread anger and disbelief

Market participants struggling under SEBI’s autocratic rules have been left smarting as the market regulator proposes unprecedented doubling of salary for its employees with retrospective effect

Market regulator Securities and Exchange Board of India (SEBI) has proposed to almost double the salaries of some employees, with retrospective effect from November 2007, according to some media reports. Not surprisingly, this has come as a rude shock to various market participants, including intermediaries and investors, who are facing the brunt of SEBI's shoddy attempts at changing the investment landscape in the country.

A series of ill-conceived initiatives on the part of SEBI to improve the regulatory framework in the securities market has left participants in the lurch. Intermediaries in the mutual fund industry have been left gasping for breath after SEBI removed the entry load on mutual funds, effectively taking out the incentives for distributors. This was followed by a whole set of regulatory changes that have altered the structure of the industry.

The result is that half the independent distributors in the country have either been wiped out or are struggling for survival. It is hardly any surprise then, that intermediaries are cursing the regulator for even considering such a fat pay-day for its employees. An intermediary remarked on the Moneylife website, "On the one hand, distributors are struggling for livelihood as small investors are no more interested. On the other, we have this Diwali bonanza for employees. This is (the kind of) justice (we get) in India."

The fact that SEBI has proposed to implement the salary hike with retrospective effect has raised eyebrows even higher. This is an unprecedented payout for a government organisation that is supposed to work for the benefit of investors. There are fears that SEBI's move will now be followed by similar proposals from other government institutions. No doubt, if this proposal goes through, others will look to line up for fat paycheques for their own employees.

Already, SEBI has among the best perks in the business. Officers from the income-tax and enforcement directorate are queuing up for job opportunities in this glamorous organisation. Why will they not, when it offers all kinds of benefits in terms of housing, travelling and what not. Investors are particularly incensed as all this comes against the backdrop of poor quality of work done by SEBI officials in the past few years.

An investor, Amit Bhargava, told Moneylife, "I fail to understand why the tax payers be burdened with this excess expenditure on the salaries of officers who have miserably failed to perform and as per my own experience are working against the interest of the investors and harass them when complaints are made. Such officers/organisations need to be punished rather than gifted with such retroactive salary hikes that even make the salary of the cabinet secretary look small."

Moneylife had earlier pointed out how SEBI went against the very grain of its existence to implement an 11-times hike in its arbitration fees that could actually deter investors from seeking justice. Such and more moves from the regulator have not gone down well with the investing public. SEBI's decision to reward itself with such opulence in the light of the work done has shocked investors to the core. We wonder how the powers-that-be at the finance ministry are going to react to this proposal.




6 years ago

SEBI gave salary hike to its staff with retro effect.
Thank God, they did not abolish commissions to Mutual Fund Agents with retro effect.

p y k

6 years ago

jai ho bhave ki. apna bhav badha raha hai~!! in a cheap way. in any other well govrned nation , these b*********,m********kr wd be fired and put behind bar. in india EVRYTHING IS NEGOTIABLE.
let us see some more "nautanki " here.

R Balakrishnan

6 years ago

Reminds me of what a government employee told me in the early seventies -- " I get my salary from the government for sitting on this chair. If you want your work done, you pay me". With this kind of an approach, it makes me wonder why they need any salary at all?


6 years ago

Dear Tanu,

With all due respects to you, I have to say that you are bringing personal animosity in this issue. I dont care if Sucheta was thrown out of any panel or not. The moot point here is she has pointed out something which is very wrong on the part of SEBI.

Zero cost to invest is not investor friendly.

Zero manipulation in the market is investor friendly. Steps taken to grow the market is investor friendly. Efforts to broaden the market by making millions of Indians in the equity market, either direclty or indirectly is investor friendly.

On all these counts SEBI has failed and has failed miserably. Do you even know what happened to people like C R Bhansali etc., who created havoc in the market? When SEC can conclude legal proceedings and put behing people like Madoff behind bars in as little time as possible, what is SEBI doing for more than two years since the Satyam scam broke out??

Coming to the question of increasing the base of investors, what has been SEBI's contribution in this? The first step for a lay investor to get into the stock market is mutual funds. With its short sighted approach in the garb of investor friendliness, SEBI is in the process of killing this indusrty. Where is the question of broadbasing the market?

I have no issues if competent people get paid. The question is, is SEBI full of such competent people?


6 years ago

Does any body know that Sucheta Dalal was thrown out of SEBI Committees for mouthing her anger at the security staff. Critisism on regulators should be constructive not blatendly one sided. If Sucheta do not know, retospective pay revisions are the order of any govt. organisations. If you remember properly sucheta had not critisized the just concluded pay revison of central govt. SEBI's revison is in line of RBI, which has also revised in the same lines. The pathetic view is that govt. employees should not be paid, however qualified they are. If I understand correctly, SEBI in a short span has shown the world, where India belong, and had changed the market to investor friendly. The same people had done that.


Madhusudan Thakkar

In Reply to Tanu 6 years ago

Tanu comments about Sucheta Ji represent smacks of arbitrariness at best and pettiness at worst.

In today's "Mint" there is report about how SEBI rules are crippling the Industry[including intermediaries].Except Moneylife media has not been kind to role intermediaries.
This is not the way to run SEBI.We feel cheated-our commitments to our own conviction and ideals -also stands diminished.We begin to doubt about lofty goals and thoughts.We have become victims of cynicism.Even brightest and most idealistic amongst us might conclude that "different path" is needed.

Media[except moneylife] has brazenly rationalised role of intermediaries as "villans".Business news today is sleight of hand.Paid news,private treaties with advertisers celebrity coverage for fee is order of the day.PR feeds masquerading as reportage,business story to serve the stock market.THE DESERVING STORY NOT DONE.Investigation and expose when it happens is because someone had a score to settle.Instead of agenda-setters journalists have become handymen,well paid but increasingly adrift from the craft and ethics of their trade.So where does that leave NEWS as we knew?.The story followed for its objective worth?The based on verified fact and authentic source?That require legwork,questioning and research?.Instead of examining,probing and deliberating on many aspects they are indulging in petty deceit.

It is here MONEYLIFE is like "Breath of fresh air".


In Reply to Tanu 6 years ago

Dear Tanuji,
yor comment of some one being thrown out from commitee for making anger on security seems like a laugh-is this a constructive or rational to criticise someone with such silly issues?with reducing retail participation of investors in stock market-i am of the firm opinion that present staff and officers of SEBI should be demoted and their salries should be reduced to half-bcos they are useless fellow who are corrupt and working against the interest of common retail investor-pay revisions for all central got employess is a issue which this corrupt country is seeing with anger-bcos MP's have increased their perks and salaries 3 times and so not surprising that thay will give a 'BOTI"dog's bite to their puppets-ie beurocracy-but listen the common people of this country all seeing all this with angeer and pressure is mounting inside masses-some day in near future it is going to explode-may be many politicians and beurocrats will be massacrd by their own security guards-so just have some fear of that day-

sucheta Dalal

In Reply to Tanu 6 years ago

How interesting that SEBI's insiders are showing their claws. I can name five people in SEBi who would probably be responsible for posting this cheap comment. Your IP address shows that this email has come from SEBI Bhavan.
Yes, I was on SEBI's primary market advisory committee. And sure, i was thrown out. i think it is a badge of honour not something I am embarassed about. I raised questions on the committee that were uncomfortable about how SEBI was hell bent on twisting rules and changing them to the detriment of investors.

About the altercation with SEBI security staff. I must put that in perspective too. Yes indeed there was an issue that I took up with SEBi's PR and its then Chairman.
SEBI had this bizarre policy of making its invitees, including committee members to get off outside the gate and run through the rain to attend its meetings.
All over the country, including high security places like North Block and South Block in Delhi which house the Finance Ministry and the Prime Minister's office, allow visitors (especially committee members) to drive up to the gate. After all, we were not going to SEBI to get some clearances or be part of a paid job, nor were we employees. This was pure pro bono work.
After my objection, SEBI has slowly changed the rules. They have even begun to issue passes to the media and to committee members.
The other committee members who were there that day thanked me for taking up the issue. They also said that as regulated entities on the committee, they have to put up with the phenomenal arrogance of SEBI's staff and can do nothing.

Why intermediaries and committee members, SEBI used to treat investors just the same. The reception area which is the size of two football stadiums did not have a single chair for an investor, who cannot enter the gate without an appointment.
That too changed when we wrote about it repeatedly.
So if you insist that SEBI threw me out because of an altercation with security, rather than (as I believe) issues of policy, then i am proud of that too.

Government employees must learn to do their jobs well and be of service to the people. Government employees must also learn that they cannot usurp the powers bestowed on them to harass constituents. Why did it not pinch the conscience of a single SEBI officer when tens of thousands of IFAs lost their livelihood overnight? And yet, look at the nastiness when it comes to their own salaries!!



In Reply to sucheta Dalal 6 years ago

sebi employees are doing the world a big favour in coming and signing the muster. they need to be paid separately to work which involves kicking investors and market intermediaries in their face. files remained unattended for months which inflicts a huge cost. then of course, brazen corruption. one guy in kolkata was caught demanding a bribe. the other was forging letter from within sebi's premises - all under the current chairman who has surrounded himself with people who will rescue him from the nsdl scandal! Of course, everyone's salaries have to hiked manifold to secure consent for this brazen operation. by the way, i wonder what this so-called Tanu has to say about sebi's throughly compromised "consent" orders. salary must be a small component of your income, Tanu. why bother to post here? enjoy life


In Reply to Tanu 6 years ago

When our MPs vote to double their salaries and perks, SEBI also follows. Bhave had ensured that his pension will be double, post retirment in Feb, unless he gobbles another prime post elsewhere in the various govt organisations. SEBI should be justly rewarded for killing the IFAs, small investors and Mutual Fund Industry in that order. Indian stock market has become the gambling den of FII and NSE and BSE brokers and SEBI is also killing any competition to these exchanges. Dont you agree all this would further the spread of equity culture in India and would be true financial inclution of the common man. SEBI is mandated to do this and are doing a GREAT JOB. why not recognize it and reward them amply.


6 years ago

ab Bhave ki naitikta (moral) gayi tel bechne. dekho Pranab Da jagte hain ke nahin

girish prasad

6 years ago

ramchandra kah gaye siya se aisa kalyug aayega,

hans chunega dana tinaka kauva moti khayega.

be ready for all ifa for ban on trail an 100 times rise in regdn fees .


6 years ago

This is SUPARI for killing mutual fund industry.SEBI will celeberate diwali when there will be darkness in distributors homes..MERA BHARAT MAHAN.



In Reply to Yogesh 6 years ago

they are also throwing small investors from MF industries and blaming on distributers.geting funds and support from goverment on name of small investors benefit but hammering to them


6 years ago

corrupt politicians and beuorocrates ate up the land which was to be given to families of Martyrs of Kargil war-the whole building has been eaten up by money hungry politicians-the savers of this country have become like beggers-remember this is height of the situation-if our soldiers wont have faith in our system-this country will soon be a slave country-i have my education in army and navy bases-and i can see that we are going for a explosion any time-may be china war or pak war-and no one will sacrifice their life for these corrupt rulers-we will fail as a nation very soon if things continue this way-


Rambabu Shastri

In Reply to Roopsingh 6 years ago

The triad of Pak-China-Bangladesh is soon heading India's way. Corruption has eaten into our country to such an extent that people will pay to get defence or security for themselves. There is no honesty left among those in power. None of them can fathom the rise of the Islamic Caliphate. At least, in Saudi, there is Islamic jurisprudence and people do not muck with the law. I expect there will be rise and rise of Islam from now on. Read the Prophecies of Nostradamus. As it is, people like Arundhati Roy, to sell a few more copies of their books are ready to shock people into garnering eyeballs to make more money and support secessionist elements. The root cause.... CORRUPTION and GREED of the political class.


6 years ago

India is repeating the old story of Hipocracy and Anarchy-TAKE SHER BHAJI AUR TAKE SHER KHAJA-means no justice to hard worker-sweet maker will sell sweets at rates o Bhaji pala-and Donkeys have dresses them up better then horses to get more incentives and attention -This is sure sign of collapse of this country-this country will fail as a nation because justice is getting rarer and people are loosing confidence in authorities-corruption is the custom of this so called Great india-and i am damn sure we are going to fail as a nation sooner rather then later.

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