You have adopted a conservative policy on provisions. Is this a countercyclical step or will it be continued in future?
We have adopted a very conservative policy and we will continue to have the same approach going forward. Provisioning is one among many such steps that include, but are not limited to, accounting policy choices, risk frameworks, underwriting choices and process resilience, among others. While there may be a dispensation for loans allowing them to be classified as standard assets and have lower provisioning, we will continue to be conservative in the provisioning overall and continue our stance in line with the pre-Covid levels.
How do you expect to restructure loans for businesses where activity has not started?
There are two aspects to restructuring — One, what is right for the customer? Two, what is right for the bank? That is, how does the bank de-risk itself? Some businesses may take a very long time to revive. In these cases, the promoter will have to demonstrate that they believe that the businesses can get back by bringing in more capital.
Do you expect to grow market share during the current year?
We had drawn up our GPS (growth-profitability-sustainability) strategy before Covid happened. While we will be conservative, we will pursue growth wherever we see an opportunity. We will use the time to ensure we capture the right opportunities. For instance, we have been one of the biggest investors in the RBI’s targeted term lending operations. In deposits, what we are seeing in recent quarters is an improvement in the granularity. We do believe that we will grow our market share over the short to medium term.
Do you think interest rates have bottomed out?
Focus for policy now should be to manage and communicate liquidity, manage the G-secs yield curve at the medium and long maturities, and incentivise credit, including compressing the spread for mid- and lower-rated exposures. The government has to work with the RBI to design a coordinated policy response for these objectives. I think interest rates are steady for now, though the RBI does have room to cut rates a couple of times. What India needs is not low-interest rates but revival of the economy.
How is the deal with Max Life progressing? The RBI had raised some questions on the transaction… Do you expect fund infusion will be an issue given that the RBI has asked banks to conserve capital?
The deal is subject to regulatory approvals and as such both parties are committed to the process of obtaining the same. We have not formally received any queries from the RBI. We do not expect capital costs to be a concern as the impact on our CET-1 (common equity tier-1) would be less than 15bps (100 basis points = 1 percentage point) and after our recent capital-raise, we have a CET-1 in excess of 15%, and overall capital adequacy in excess of 19%.
There have been several changes at the management level. Is that a reflection of changing priorities?
No, I don’t think so. There are three categories of exits — first being those who have left because of governance or discipline issues, second are those who had a different perspective on their career aspirations and have looked for roles outside. However, recently, a couple of senior executives had to leave because of personal issues that has nothing to do with the bank. The issues they had could not have been addressed at Axis, and they had to move somewhere it could be addressed. We are a large bank and have enough talent pool. In fact, we have seen a few senior employees returning as well. We have been clear that wherever there are gaps, we will first look for internal replacements. It’s an ongoing process and we have recently brought in a new head of strategy and multinational coverage. Is there any value unlocking that is planned?
We want to grow all our subsidiaries and achieve scale. This has been a part of our ‘One Axis’ strategy and is in play. Axis MF is one of the fastest growing MFs and doing extremely well. We want all of them to grow and have made several top-level hires in the subsidiaries to support their effort.
How do you plan to utilise the Freecharge platform? How is your digital strategy playing out?
UPI has reduced the significance of digital wallets. We expect that Freecharge will help in customer acquisition for different products of Axis Bank. As Freecharge is not a finance company, it cannot lend, but it can generate leads for the bank. We were the first to have a separate digital team in place and this is an area where we are going to spend more even if we have to do cost-cutting elsewhere. Over 70% of our fixed deposits, 53% of mutual funds, 50% of business loans are sourced digitally, 40-45% of personal loans, and credit cards are digitally sourced. We are digitising at every level. For our staff, we have recently rolled out ‘bring your own device’, which has now been rolled out to 36,000 frontline employees. We will be launching the ‘Full Power Digital Savings Account’ that can be opened instantly with video KYC. Keeping in mind the need of the hour, the product proposition provides access to 250+ services online and virtual debit card, through which customers can start transacting immediately after opening the account. We are building digital capabilities on the SME and corporate side as well where we are building an omnichannel solution for corporates.