Credit where it’s due

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When I look back and read business history, there has been no shortage of visionary leaders," observes K.V. Kamath. "The problem is that in a lot of cases, visions have remained only visions because they didn't have a team to execute it."

It's a refreshingly humble observation from the managing director and CEO of ICICI, who since taking the helm in 1996, has been the driving force behind the bank's rapidly increasing asset base - which today stands in excess of US$70bn, comfortably making it India's largest privately-owned bank.

Despite his own modest demeanour, the international community has been quick to recognise Kamath's talent. Named ‘Asian Business Leader of the Year' by CNBC in 2001 and ‘Businessman of the Year' by Business India in 2005, Kamath has been credited with leading the transformation of ICICI into a diversified technology-driven universal banking group. ICICI today dwarfs other banks on several measures - most notably it has been credited with bringing the retail finance phenomenon to India, and in doing so, enabling the rising Indian middle class to fund their lifestyle requirements across the country.

Even his fiercest competitors profess their admiration for Kamath and his achievements. AK Purwar, chairman of State Bank of India (SBI), has not shown any reticence in awarding the credit to Kamath: "Of the three major development finance institutions, ICICI's transformation was the most dramatically successful. It was Kamath's foresight that converted it into India's second biggest bank and the number one retail player."

Today, Kamath is reclining in a comfortable leather chair in his office overlooking the Dubai International Financial Exchange, where the bank has just opened its first wealth management advisory branch in Dubai. ICICI has over 15 million customers in an economy that is growing at scorching speed, and its CEO is determined to make sure the bank matches that pace: "In India today, there are three growth horizons: the consumer credit horizon, the corporate credit horizon and an international horizon, and that is what we are doing here."

This is not ICICI's first foray into the Middle East. The bank has already experienced great success in the region, after the Bahraini government made it compulsory for all labourers to open a local bank account to which their wages could be credited by their employers.

As Kamath recalls: "Looking at the opportunity, ICICI Bank took the initiative and became the first bank to open accounts for labourers in Bahrain."

It is a system that could easily be adapted to fit the entire Middle East market, and while Kamath would be keen to offer this banking solution to labourers in the UAE, he explains: "We do not have a full commercial banking licence in the UAE, however subject to ICICI being accorded regulatory approvals, we would definitely consider it."

For the time being, Kamath has more than enough on his plate. ICICI Bank's international presence today spans 17 countries and includes three wholly-owned subsidiaries in the United Kingdom, Russia and Canada, offshore banking units in Singapore and Bahrain, branches in Sri Lanka, Hong Kong and Belgium and representative offices in the United States, China, United Arab Emirates, Bangladesh, South Africa, Indonesia, Thailand and Malaysia.

As far as Kamath is concerned, however, the fourth and most important horizon for ICICI today is reaching "the rural masses" in India - 600 million people in 600,000 villages.

"I think the biggest challenge and the biggest opportunity in India are the people in rural areas. If we create rural wealth, we will ignite the nation and put it on a completely different path. You can't have a branch in that number of villages so the biggest challenge we have is how we as a bank reach out to them," says Kamath.

In fact, ICICI has already started rising to the challenge and even though its imprint on the rural canvas is still negligible, Kamath has past achievements from which to draw his confidence: "We have the experience of financing huge projects from our days as a financial institution when we took on huge risks. And just as seven years ago, we had a vision with our consumer credit business. We believe this rural scheme is a scalable strategy."

The crucial ingredient in implementing the rural strategy will be technology which Kamath decided to make one of the cornerstones of ICICI in 1996. Kamath had a conviction that technology could be the differentiator at a time when bankers - both internally and externally - felt that technology investments were a foolish move. "Back in 1996, when we had to scale up our banking business, what struck me was that technology was about to take a big leap - the internet and the dotcoms were starting to take off. Other banks were sceptical, and I wouldn't blame them because it needed guts to take the plunge. Other banks didn't jump, so we got the edge we needed."

That ‘edge' is a high-tech platform that is the envy of most First World banks. Although ICICI has only 750 branches to SBI's 14,000 branches, it has asserted its presence through a network of over 3000 ATMs, call centres, videoconferencing and internet banking facilities.

"I was told in so many towns that I went to ‘nobody in this town will use an ATM'. 50% of our transactions are via an ATM today, 17% on the internet (over nine million customers are enrolled online) and 13% through the call centre. So the bank branch which seven years back conducted 95% of our transactions is now down to low double digits," exclaims Kamath resolutely.

"We want to be a lean bank in terms of branches but a substantial bank in terms of technology architecture," says Kamath decisively, before continuing: "Not only have we used technology more than most Indian banks, but we have used technology much more innovatively than global banks, and we've done it at a fraction of the cost. And those three achievements are what I am most proud of."

This innovative use of technology is most sharply illustrated by the fact that ICICI is ushering rural India into 21st century banking through the use of technology that even James Bond would be proud of.

"We go to the village carrying two suitcases," explains Kamath. "One suitcase contains a computer with a thumbprint reader and a straightforward camera. The other suitcase contains a collapsible aluminium table, and also two collapsible stools.

"The ICICI employee carries out a questionnaire on the villager whose answers compile the application form for the bank account," he continues. "Their photograph is taken, their thumb impression read and they are issued with a smart card that stores all their banking transaction details. The need for a bank is eliminated entirely. Instead you make the customer carry the bank branch in his pocket."

An incongruous image to say the least, but to Kamath, it makes perfect sense: "We have removed any potential obstacles an illiterate villager might have - the villager doesn't need to enter a PIN because his identification is biometric."

The villager transacts from a terminal similar to a credit card point-of-sale which is located in the village shop. "It's exactly the same as swiping a credit card except that it is activated in a different way and the chip on the smart card can store other details. For example, we can offer them a health insurance product and other products," explains Kamath. In line with its ‘no white spaces' policy, the scheme aims to ensure that every village in India has a terminal, ideally a kiosk, within a distance of two kilometres. "I don't expect them to have internet at home, certainly not, so they need a place to transact. The second and third generation of villagers are quite tech-savvy so I think they will be the initial converts, which will create a momentum across the villages," says Kamath with an evangelist's fervour.

ICICI only began installing the terminals in the villages three or four months ago and so the scheme remains very much in its infancy. Kamath, however, is not daunted by the enormity of the scheme, rather he points to research to illustrate that literacy levels don't correlate to an ability to adopt technology within low-income bands.

"Two years ago, an American University professor carried out a survey in several Indian fishing villages and asked them, ‘What are the top three things that you require?' Nine times out of 10, the first request from the fisherman was for a mobile phone, so that when he was returning from sea he could call the coastal villages, to ascertain where he would get the best price for his catch. It just goes to prove that whatever level of business you're in, people are still aware of the inherent convenience and of the value of technology."

Kamath goes on to observe: "Five years back, I would not have believed this, but it's obvious now that my customer is ahead of me on the technology curve."

In fact, the smart card scheme is a later phase in ICICI's rural strategy. The first part of the cycle is providing villagers with loans for sustainable activities. They can use the money they have saved from this to set up a smart card savings account. "It will be in about two or three years' time that savings accounts will become more predominant, and we can help them in their consumer needs, for example, buying a home and a car."

For those from very low-income households, particularly rural entrepreneurs, ICICI is offering microfinance services in partnership with microfinance institutions (MFI) and non-government organisations (NGO), which now amounts to a network of 102 partners.

As Kamath explains: "The rural poor cannot afford to take large loans as they can't service them so instead we need to offer them small loans."

The scheme echoes that of recent Nobel prize-winning Bangladeshi banker and economist Muhammad Yunus, and his microcredit concept - a comparison Kamath welcomes. "What Yunus did so well is he targeted self-help groups of 10 or 20 people - mostly women - by giving them loans to invest in sustainable activities, such as a tea stall or a tailoring establishment. Each one borrows individually but they're collectively responsible and that's what makes it work. The core strategy we are applying to rural India is very similar."

ICICI has already secured 2.6 million microfinance customers and believes partnering with MFIs will help them achieve the ‘10 x10 goal' - US$10bn in assets by 2010, covering 25 million customers. Big numbers, but according to colleagues, Kamath's mantra is scale and if it's not millions of customers or billions of dollars, he's not interested.

The rural loan scheme was activated three years ago and has so far proved successful. As Kamath points out: "The cost of transacting on the net is only US$0.046 (two rupees), whereas it's US$1.15 (50 rupees) for a branch transaction. This reduction in operating costs has then further helped us with the pricing of loans," he says.

To date, the bank has not encountered any problems in terms of abuse of loans. "We purposely built it slowly to see what happens in difficult times - for example, if there's a drought - but to date our default levels on loans are extremely low," he says.

"The scale on which we are trying to achieve this is unprecedented," he continues. "Yet if you flip the challenge then it's an opportunity because it's an unexplored market. I personally believe there is no other possible strategy, so we have to make this strategy work."

On the strength of Kamath's past successes, he is surely a man who can bank on his instincts.

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