Objective is to leverage LVB merger and deliver RoE.
DBS Bank India’s MD and Head - Consumer Banking Group says, in terms of consumer bank growth strategy, we want to be the top wealth management brand in the top 20-25 cities
With the amalgamation of Lakshmi Vilas Bank now completed, the focus for DBS Bank India is on stabilising the realigned distribution, upgraded branch network, and people and tech integration.
Speaking exclusively with the business line, Prashant Joshi, MD and Head of Consumer Banking Group, DBS Bank India, elaborates on one plan ahead.
How has the LVB merger changed the business strategy and model for the consumer banking business?
When LVB merged, one of the significant strengths was a sizeable retail deposit book. The second was good distribution, albeit South-centric. And another capability, which if we were on our own, we would have never done, is the gold loan business. No foreign bank has gone anywhere close to that business, but we were clear that it’s a great business that we will scale up.
Regarding consumer bank growth strategy, we want to be the top wealth management brand in the top 20-25 cities, including South India. Second, we want to double the retail deposit strength we inherited through LVB. Our CASA ratio today is around 30-31 per cent, and we need to get to 40-45 per cent. We are in 348 cities/towns, which account for 70 – 80 per cent of the country’s deposits. So, access to the markets is not a problem. The third part is to grow our lending businesses, mainly secured lending. Consumer and SMEs are where the entire focus is now. In consumer, it will be gold loans, where we’re already significant. Second is MSME financing for companies with turnover of up to five crores, and third is affordable housing finance. On the unsecured personal loan side, while we cross-sell to our deposit customers, we are also growing through partnerships or co-lending programs.
Will you look to expand the branch network?
We have around 530 branches. For now, we want to make sure that we make all these branches productive. We may add 10-20 branches where we need presence. But I don’t think we’ll continue to grow by adding units because we have a reasonable size now. The growth will have to come by overlaying our digital DNA and digital capabilities onto this existing distribution.
Where do you see the share of consumer business as part of the total loan book?
The product mix is 40-30-30 today (large corporate, SME, consumer), but in the next five years, it needs to move to 70 per cent, coming from consumer and SME, and corporate will be 30 per cent. Purely in terms of incremental addition to assets, the highest growth will be from gold loans, credit cards and unsecured loans. And then, affordable housing and MSME financing are put together.
Are you feeling pressure to offer higher deposit rates?
Right now, there is a war for deposits. At an industry level, deposit growth could be muted for another three months. We like and try to be the best in one bucket at all times or at least be on par with the marketplace. Through LVB, we have an outstanding senior citizen, fixed deposit base, which is the stickiest. Even if you have to pay a bit higher, it’s okay. Our retail deposits are around 45 per cent of total deposits, and we need to take that share up substantially.
Is the lending environment getting tighter?
Coming off the pandemic, people are travelling more and consuming more. We are seeing turnovers getting back to pre-pandemic levels and beyond that. But where the impact is being felt is the mid-segment or luxury goods. That is where people are feeling a bit of a pinch. Credit growth will continue to outpace deposit growth for the next six months. CD ratios would rise in the short term.
What are the focus segments in wealth management?
Before amalgamation, we were in the top 8 cities, where a large proportion of our wealth management business is even today. Now that we have the distribution, leading 20-25 cities are where we would like to deepen for the next five years at 20-25 per cent CAGR.
Interview of Prashant Joshi, Managing Director & Head, Consumer Banking Group, DBS Bank India
As featured in The Hindu Business Line