DBS Bank India CFO bets big on retail & SME

We are looking to harness the potential of 530 branches post the integration with Lakshmi Vilas Bank, says Rajesh Prabhu.

Rajesh Prabhu, CFO at DBS Bank India, in an interview with ETCFO, discussed the bank’s growth and fundraising prospects for the next financial year, 2023-24. He is aspiring for 10-12% credit growth, banking big on the SME and retail books. 

The finance leader also shared his views on the importance of Board Directorship for him and the new stricter Indian accounting standards, which require higher provisioning by banks. Below are the edited excerpts of the interaction: 

Q: What credit growth are you likely to finish with this fiscal and what aspiration do you have for FY24? 

We may end this fiscal year with at least 10-12% (Credit growth). Last year our advances rose from about Rs 36,000 crore to Rs 44,000 crore, which is about 19% growth. This year, we expect the Rs 44,000 crore to grow 10-12% and reach close to Rs 50,000 crore. The same momentum is expected for the next financial year. 

Q: Which verticals are you primarily looking to grow? 

We are looking to harness the potential of the 530 branches that we have now with the successful integration of the Lakshmi Vilas Bank. (DBS Bank India acquired LVB in November 2020 and completed the integration in December 2022).

We are primarily looking to grow SME and retail books. We aspire to take each retail and SME to contribute 30% each and the remaining 40% to be the corporate portion. Currently, we have a 55% large corporate book.

Having said so, the focus would also remain on corporate; however, the pace of growth would be much more in the retail and SME space than the corporate book.

Q: How do you foresee the impact of a 225 basis-point increase in the interest rates so far since May 2022? Will it have any material impact on future credit growth?

Most banks have passed on the majority of the increase. The RBI’s Financial Stability Report shows that credit growth year-on-year grew by 17% odd in September 2022, while deposit growth grew by 10%. It will be important to see how banks going forward will raise deposits. But we have 530 branches and are very confident about our deposit base.

Q: In the corporate book, are there any specific sectors DBS Bank India is bullish on?

We are not sector specific. We have exposure to all large corporations in India.

Q: What is your sense of private investments? There is a view that only sectors which are seeing demand are investing but large corporations are still holding back amid global uncertainty.

I don’t see pessimism at all. According to the latest December 2022 Financial Stability Report by the RBI, scheduled commercial banks' credit growth reached a decadal high of 17.5% in September 2022.

Q: How much does the Indian market contribute to DBS’s overall revenue? And from the growth optimism you are projecting, do you see the share rising significantly?

The Indian market (both offshore and onshore) is roughly 5% of the Group’s overall business. We foresee this share rising in the next 3-4 years, but it won’t be easy to give any specific projection at this point in time.

Q: What is your outlook on asset quality?

Already, we have brought down the gross non-performing assets ratio to 7.7% as of September 2022 from 12.9% as of March 2021. We aim to further improve it to 6% through an enhanced focus on recovery and restructuring mechanisms.

Q: How are your fundraising plans shaping up for FY24?

We are well-capitalised as of now. Our capital adequacy ratio is healthy at 16%. We should be able to meet our growth target from our existing capital. We don’t expect to raise any growth capital in the near future.

Q: When do you think the RBI should roll out new stricter accounting norms?

It will depend on the RBI but we hope the regulator provides at least one year to smoothly transition to the new norms. The regulator, in January released a discussion paper on the introduction of the expected credit loss framework for provisioning by banks. The earliest timeframe for the implementation could be financial year 24-25 but as mentioned, it will eventually depend on the RBI.

Q: What are your views on the role of the CFO for the next 12-18 months?

CFOs need to continue ensuring that they are seen as trusted advisors for all strategic decision-making. Finance leaders need to support decision-making with necessary data points, to ensure the decision is taken in the right manner.

Q: Last, how the Board directorship helped you become a better CFO?

I am a Board Director and part of various Board committees, including the credit committee. The Board seat gave me increased exposure. It enhanced my overall business understanding and helped me to see things more holistically and not just from the finance lens.

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