We're choosing our own battles: Axis Bank's Amitabh Chaudhry

Q. The finance minister and the RBI have spoken about the need for higher deposit growth from banks. What is the way ahead for a bank such as yours?

It will all depend on liquidity. There are four ways to get deposit growth going. The first is credit growth which feeds into the system; the second is how much money RBI is putting into the system through printing or injecting into the banking system. The third is government balances (the more kept with the RBI, less the deposit in the system). The fourth is cash in the system: More the cash with people, less will be in the form of deposits.

The government has started leaving less balances in the banking system. The RBI had tightened liquidity until recently, but this situation is improving. If credit growth improves and the RBI injects more liquidity, deposit growth will come back into the system.

Q. Where do you see Axis Bank’s journey going, considering it has been the third largest private bank in India for years?

On joining, I had spoken about wanting to move away from being the third largest bank. In a lot of our businesses, there is a gap between the second and the first (largest) bank. We want to gradually start becoming the second and the first in the identified businesses. We have started seeing that in a lot of businesses.

We launched Burgundy Private before Covid-19. In this business, we are now the third largest in India, based on data from Asian Private Banker. In the Unified Payments Interface (UPI) transactions, as a Payer PSP Bank, we have a 33.3 percent share. MSME advances we are the second largest (the share of business has risen 800 basis points). In the credit cards business, we are now the fourth largest in terms of issuances. The Bharat Banking core asset book also expanded year-on-year, by over 21 percent CAGR over the past five years. Now we are choosing our battles.

Q. Will all this add up to being the second largest bank at some point?

It is a long journey. In terms of assets, ICICI Bank is 40 percent larger than us. If we create the right platforms, keep adding and building on it over a period of time, we can get there. We also have to assume that the other banks may not execute as well… to ensure we bridge the gap. Will technology allow a bank to leapfrog? That is the opportunity for us. We believe we are on the right track, we know how to get there, now we are executing it.

My predecessor Shikha Sharma had bet big and invested in digital lending and in UPI-related technology. She did the right thing; one day it will pay for itself. It can pay for the bank if we execute it right. If it works, it can be a game changer.

Also read: How Axis absorbed Citi's consumer business

Q. After the Citi acquisition, what else is Axis Bank interested in, inorganically?

It is not that we are going to say no, but I don’t see any opportunities coming our way immediately. Citi’s consumer banking business was a small acquisition— $1.33 billion in costs, which took seven months to negotiate, 18 months to execute completely and yet was completed one-and-a-half years in advance. A bigger acquisition will take the bank away from its focus by at least two years. Big banks are getting bigger at the cost of smaller ones: there are complexities of business, cyber security concerns, technology challenges and compliance issues. If smaller institutions do not merge with larger ones, they don’t become larger. They will suffer due to their lack of scale.

Citi’s consumer banking business was worth the time and effort. We were a mass affluent franchise, acquiring Citi has positioned us across the entire spectrum. Their customers and employees have stayed with us, the technology migration has been a smooth journey.

Q. The Digital Data Protection Act is set to be a law soon. Your assessment on its impact?

It is a bit of a discovery process. The consumer will understand over a period of time their data is secure, and they have the right to decide who keeps the data and how they use it. As they become more mature, that is when the business advantage for a bank comes in. The fine balance has to be struck between convenience and not allowing the wrong people to use it.

Q. What is the rationale for a stake sale in Axis Finance?

The RBI had indicated that it would not want the bank to increase equity in Axis Finance because it is common business. Axis Finance has grown 37 percent CAGR in assets for the past five years with a 28 percent year-on-year growth in its retail book. For its growth plan, we need to raise `3,000-5,000 crore over three to five years. It is unfair to stop a strong subsidiary from growing. This is a niche but high-return business, hence we are raising money from the market, mainly through private equity and strategic investors.