In 4 years, 60% advances will come from retail

We want to acquire customers at the least possible cost. So this particular transaction offered very compelling opportunity.

The youngest bank of the country, IDFC Bank, which started operations in October 2015, has been quick to take the inorganic route to acquire customers, an area which its MD & CEO Rajiv Lall terms as the ‘foremost challenge’. In an interview to Manojit Saha , Mr. Lall discussed his transformation plan for the bank from an infrastructure financier to a bank focused on retail.

Excerpts:

Why did you acquire Grama Vidiyal?

As a new bank, our ambition is to become a mass retail bank in five years. Our foremost challenge is customer acquisition.

We want to acquire customers at the least possible cost. So this particular transaction offered very compelling opportunity.

We will acquire 1.2 million customers in a rapidly growing customer segment, in a geography which is predominantly south-based. Between, October (when started operations as bank) and March, we have got 65,000 customers of our own. I aim to take that figure to at least 1.5 million by March 2017.

Your loan book primarily consists of infrastructure loans. Will this acquisition expand your retail book?

This will contribute to our retail asset book.

We expect our retail asset book to be 25 per cent or Rs 15,000 crore of our total loan book by March 2017. So, we will have 25 per cent retail book within 18 months of starting operations.

What was the criterion for the acquisition? Were there other suitors?

Mostly it is the cultural compatibility. People are critically important. I know Mr. Devaraj (CMD of Grama Vidiyal) who is an extraordinary person.

He has built the entire organization. When we met first time, we saw very much eye to eye. We had looked at the landscape (before finalising with Grama).

When will the deal close? What will the role of Grama Vidiyal officials be?

Over the next 90 days, this acquisition will be completed. At the end, Grama will become a 100 per cent business correspondent subsidiary of IDFC Bank. All the liabilities will move seamlessly to IDFC Bank book. Grama will then comprise of 319 branches and 3,000 employees whose job will be to originate business and the only thing that will change is that the business will be originated not for their balance sheet but for the parent entity which is IDFC Bank.

Their senior management will stay, with Mr. Devaraj becoming the executive chairman of the subsidiary for three years and Arjun Muralidharan, the chief executive of Grama Vidiyal becoming the MD & CEO of the subsidiary.

And there will be few of us who will join the board.

Will Grama’s 319 branches become IDFC Bank branches?

Some of the branches, not all, will be converted into those of IDFC Bank, which has 60 branches as of now. We also have 1,100 points of presence through micro-ATMs.

What is your strategy for expanding retail foot print?

If you look at our region-based strategy now our focus will be to expand in Rajasthan with our own organic foot print. South has been taken care of with Grama. In Andhra Pradesh, we are in by ourselves. For North-East, we have a tie up with ASA MFI, in which we had a 10 per cent stake. So what is the remaining is the entire cow belt.

What is your medium-term roadmap for the bank?

Within 48 months, more than 60 per cent advances and 22 per cent liabilities will come from retail banking. And I aim to increase the pace of customer acquisition.