Corporation Bank over the years has emerged as a model for other public sector banks. Today the bank boasts of being one of the most efficient banks in the country, even when compared to its private sector peers. Much of the evolution and improvement the bank has seen over the years has been under the able supervision of its CMD, Mr. K. Cherian Varghese. Mr. Cherian Varghese is a postgraduate in Science and was a recipient of the National Scholarship of the Government of India throughout his University education. An associate of Chartered Institute of Bankers, London, Shri K.Cherian Varghese has been conferred with the "Roll of Honour" of the top fifty who passed the examination conducted world over in 1983 by the Chartered Institute of Bankers, London.
In an interview with Equitymaster, Mr. Cherian Varghese, CMD, Corporation Bank shared his views on the Indian economy and his views regarding the future direction for Corporation Bank.
EQTM: What is your view on the long-term prospects of the Indian economy? Which sectors do you think will lead the Indian economy going forward?
Mr Varghese: I am very positive on the long term prospects of the Indian Economy. With a very large technically trained human resources base and a substantial population which offers a large market, India will be a robust growth economy. The services sector is the major contributor to the Gross Domestic Product in India signifying the fact that Indian economy is more sophisticated and mature compared to many other developing nations. India will become a major center for business process outsourcing with its technical resources, English speaking professionals and location in a favorable time Zone. I foresee India and Mumbai developing as a major financial center in 10 years time and it may become a rival to Singapore and HongKong and will be able to take on London thereafter.
EQTM: Credit demand from corporates has remained sluggish over the last few years. Why is there a hesitancy to invest in capacities? What is the trend going forward?
Mr Varghese: The retail sector is growing fast and this will trigger more demand. Banks are scouting for more opportunities to lend to retail borrowers. A booming retail segment will induce additional capacity expansion and launching of new projects in the industrial sector. With quotas disappearing under WTO, Indian Textile sector is likely to become very vibrant. When the industrial sector adds capacities, there will be more demand for credit.
EQTM: Apart from corporates, demand for credit from food sector and retail market is showing promising signs. The hitherto ‘cautious Indians’ seem to be agreeing to the idea of loans. Is there a change in mindset and what are the other fundamental factors that is driving the retail side of credit approvals?
Mr Varghese: Indians are gradually shifting from the age old practice of saving and then spending to borrow, spend and repay with cheaper money in future. This is more prominent in the housing sector as there is large unsatisfied demand for housing stock. There is also the yearning to improve the status and quality of life by acquiring automobiles and household goods.
EQTM: Where do you see the Indian banking sector when compared with other developed markets?
Mr Varghese: Indian banking sector will be comparable with best in the world in 10 years time.
EQTM: The much talked about Securitisation Act still has loopholes that need to be addressed. What further measures have to be taken in order to ensure that the act has long-term positive impact on the industry and on the economy?
Mr Varghese: The Securitisation Act has already started yielding positive results. The road blocks by way of pending litigations are in respect of specific accounts and these may be disposed of early. The Act may be extended to other segments like housing finance companies.
EQTM: What according to you are the requisites for banks to survive in the new and changed banking sector scenario?
Mr Varghese: Banks have to adopt technology, strive to change the mindset of the employees and price their products properly.
EQTM: What is your vision for the bank? How would you rate the progress of Corporation Bank compared with global banks?
Mr Varghese: In Corporation Bank we have already chartered a Shared Centenary Vision for our Bank and that is to “To emerge as The Most Preferred Bank with Global Standards in Financials, Efficiency, Technology, Products and Services”.
Our Financial ratios as on 31st March 2003 indicated below are comparable to international benchmarks :
- Capital Adequacy Ratio 18.5%
- Return on Average Assets 1.9%
- Non Performing Assets 1.65%
- Cost to Income Ratio 35.6%
We are also the first Bank in India to adopt international accounting practices [US GAAP] among public sector banks in India since 1999.
EQTM: Since new generation private sector banks are slowly invading your turf, what steps are you taking to beat competition?
Mr Varghese: With our technology updation, we hope to take on competition successfully.
EQTM: Since LIC has a sizable stake in Corporation Bank, how do you plan to leverage LIC’s strengths and vice-versa?
Mr Varghese: We have already opened 100 service units in LIC consisting of 24 branches, 25 extension counters and 51 ATMs. More are in the offing to facilitate accelerated business with LIC and potential other clients in the respective areas. We have already started selling bank assurance products under our Corporate Agency for LIC. We see the relationship growing further.