'Yes' to Change:Rana Kapoor
Rana KapoorFounder and MD, YES Bank
Few Indian banks push the technology agenda like YES Bank. Partially because of its new-comer status and because of the entrepreneurial culture it fosters, the six-year old bank takes IT innovation very seriously. Take for example, its most recent tie-up with Obopay, which makes it the first Indian bank to support mobile-to-mobile money transfers.
Credit for much of that innovative spirit goes to Rana Kapoor, founder and MD of YES Bank. Kapoor, a risk-taker and entrepreneur in the financial space for 30 years, knew he was raising the stakes when he started YES Bank. But the bet paid off. In the first quarter of this fiscal, YES Bank’s net profit rose 56.3 percent, the highest in its history.
- Q.Tell us a little about the growth of YES Bank and its evolution.
- Q.Let’s talk about your career and what your banking experience has taught you.
- Q.How have you brought these lessons to bear at the bank?
- Q.YES Bank cultivates an image of being a ‘technology bank’. What is IT’s role?
- Q.Can you give us some examples?
- Q.Despite these strides, YES Bank still has some way to go. What is your vision?
- Q.You said 64 percent of your business comes from wholesale banking. Do you intend to change the equation?
- Q.What did the slowdown teach YES Bank?
- Q.What are YES Bank’s technology plans for the future?
Full Interview with Rana Kapoor
We like to call ourselves a ‘new-generation, private, Indian Bank’, which I am sure, will evolve to the professionals bank of the country.
We have had a sequential growth over the past six years as a wholesale bank (wholesale banks work primarily with institutions and organizations). These accounts constitute 64 percent of our business volumes. We have also established a full-service commercial bank, and this comprises 28 percent of our business.
We are now leaning towards building an integrated SME and MSME (Micro, Small and Medium Enterprise) proposition. Through our enterprising branches across the country, we want to provide a superior service proposition and comprehensive banking services.
In the next five years, we want to build an enduring financial institution through a culture that stimulates and fosters innovation in new products, services and processes—and new business and financial models. YES Bank’s vision is to build the world’s ‘best quality bank’ within India by 2015. And, I am sure, IT will help us manifest our vision.
My career has fluctuated between commercial and investment banking and now to a more comprehensive banking platform. Prior to founding YES Bank, I was the CEO, MD, and main managing partner of Rabo India Finance, a corporate finance and investment banking organization. Before that, I was the general manager and country head for ANZ Grindlays’ Investment Bank.
Three decades in banking has made me believe that to be a professional entrepreneur you need to nurture a powerful vision. I believe in the mantra of ‘visualize to actualize’. Once you develop a vision, you must charter out a differentiated strategic roadmap to translate that vision into reality. The success of an entrepreneur lies in his ability to differentiate his line of thinking and put together a team of execution-oriented leaders who share his passion to achieve and execute
Piggybacking on my experience, YES Bank has been built on the pillars of knowledge banking, responsible banking, IT, human capital, and superior, high-quality customer service. I have also learnt that a banker needs to align his vision and strategy with precision deliverables. There have to be short-term, medium-term and long-term objectives and a clear and measurable blueprint. A professional entrepreneur should cultivate skills like problem solving and strategic decision-making. At YES Bank, we have instilled a culture of entrepreneurship. All YES Bank leaders are empowered to make decisions that are best for the organization and are in line with over-all business objectives.
Since our inception in 2004, we have known that if we were going to take on other established and well-entrenched players, we had to offer a different and compelling value proposition to our customers. In order to thrive in this highly-competitive and cluttered sector we would have to develop a strong innovation quotient in our business model and strategy, riding on IT.
The first five years were about innovating to survive and keeping our cost-base low. Hence, we outsourced our IT to Wipro as part of a seven-year partnership deal in December 2004. Wipro set up and managed all of YES Bank’s core infrastructure and hardware, branch rollouts, networking, datacenters and back-up support on a build-own-operate basis. We were the first bank in India to adopt a total IT outsourcing model. Others soon followed suit.
The next five years will be about innovating to thrive. In a bid to do this, we have tied up with US-based First Data Corporation (FDC), for example, for an innovative ATM deployment program. FDC will ensure that the ATMs are installed in high footfall locations. This move will help YES Bank reduce its capital expenditure as the cost of setting up and servicing ATMs will be borne by FDC.
IT has always helped us negate the disadvantage of our smaller branch network and promoted us as key innovators in the sector.
YES Bank was among the earliest to get onto the online Real Time Gross Settlement (RTGS) and National Fund Transfer (NEFT) platforms. We were the first to enable speech-recognition in phone banking and, today, are ready to offer video-based phone banking services when 3G becomes widely available in India.
We were the first bank in India to offer two-factor authentication for online funds transfers. We also offered Money Monitor, a first-of-its-kind, online financial aggregation tool in India.
YES Bank introduced e-checks for the first time in India as well, where customers can make real time payments to any bank account with any other bank in India. As a matter of fact, we also introduced mobile payments—a first-of-its-kind, secure, person-to-person payment service in association with Nokia and Obopay. YES Bank will act as the issuing bank and the custodian of funds under these services.
I want YES Bank to be a global bank by 2020. We are aiming to become India’s No. 4 private sector bank by 2015. In order to realize this vision, we have embarked upon YES Bank’s next phase of growth, what we call ‘Version 2.0’. Towards this goal, we will be investing about ` 60-75 crore in expanding our branch network. In order to expand our pan-India footprint we are planning to open 100 new branches in the next year. We have received licenses from RBI to open 91 new branches in June 2010 and plan to scale-up our branch network to 750 branches in five years. YES Bank also plans to set up 500 ATMs by August which will be increased to 3,000 ATMs by 2015.
In Version 2.0, I envision YES Bank achieving a balance-sheet of ` 1,50,000 crore, a pan-India branch presence of 750, manned by a staff of 12,000 by 2015. Currently we have an employee base of 3,030 people, which we plan to raise to 4,500 by end of this fiscal. Over the next five years, I am looking at a CAGR of 35 percent. In that five-year period, YES Bank proposes to take its loan book size to ` 1 trillion, from ` 221.93 billion now.
We plan to expand our wholesale banking business. We are roughly about 20 percent of our potential. Similarly, in commercial banking we are 8-10 percent of our potential. We have less than 500 relationships in our commercial business and the potential is to expand it to 5,000 relationships. Then, in the SME business, we have a target of anywhere between 2-2.5 lakh relationships. As of now we have 7,500 customers in that business.
Our focus will primarily be on branch banking with a focus on deposit mobilization. That is one area we need to improve: Our current account and savings account (CASA), and granular fixed deposits. YES Bank is looking to increase its CASA at a percentage of total deposits from around 10 percent to 20 percent by 2012. We have a strong focus on building strong, stable, low-cost CASA and if we do this our net interest margin should go up from 3 percent now to between 3.75 percent and 4 percent. Our long-term goal is to build CASA up to 40 percent by 2015.
We saw the economic slowdown as an opportunity. We believe in Carpe Diem or seize the opportunity, everyday! While most of our peers took an introspective approach, we decided to seize the moment and persistently pursue our business goals. This approach helped us identify key growth areas. We quickly realized that certain industry verticals showed potential even during recessionary times. Our focus was on harnessing the latent potential of these sectors.
Some of these verticals were agribusinesses, the healthcare sector—which includes pharmaceuticals and life sciences—and the infrastructure space. These three sectors emerged as our focus areas. The agribusiness showed tremendous potential and proved to be relatively resilient to the economic downturn. And it is still untapped. The other big area that needs to be tapped is the services sector where there is enormous potential. Agriculture, healthcare, hospitality, infrastructure, and education will be the industry verticals that we will focus on to drive our growth.
We also strengthened our in-house capabilities, pursued a differentiated business strategy, and kept a single-minded focus of delivering innovative products and services to drive customer satisfaction. We have outgrown the industry so far this fiscal and delivered better than expected returns to all our stakeholders since our inception.
Going forward, the single most important focus of our short- and medium-term strategy is to build strong institutional relationships.
To take our service-oriented and customer-friendly banking approach to the next level, we are innovatively leveraging RFID technology to setup branches of the future. One such branch has been established at the South Extension at New Delhi. Here, customers’ debit cards are embedded with RFID microchips, which transmit identity information to relationship managers as soon as customers walk in. The customer’s basic details and a photograph pop up on a relationship managers’ screen, saving time and eliminating introductory verification.
Such branches will be launched as a novel concept in partnership with Intel. The South Extension branch has been designated as the YES Bank Intel Global Innovation Center, where such and more innovative technologies will be tested live in a production environment for the first time. This is Intel’s only Global Innovation Center outside of China. I am quite sure that such initiatives would help us stay lean, dynamic and competitive.
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