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Small Can Grow Big and Become Stronger Interview with Prakash P. Mallya, CMD, Vijaya Bank

Vijaya Bank celebrated its Platinum Jubilee during the year 2006. Could you please tell us something about the origin and evolution of the Bank?
Vijaya Bank is one of those banks of South India to have originated from the Coastal District of South Kanara in Karnataka, hailed as the cradle of Indian Banking. It is the youngest of four Public Sector Banks of today to have hailed from the District and has a legacy of banking enriched by banks like Canara Bank, Syndicate Bank and Corporation Bank, which too have their origin in the district. The Bank was founded in the year 1931 by Mr. A. B. Shetty - a freedom fighter and a leader of eminence - alongwith others from the enterprising ‘Bunt’ community. It was not exactly a smooth sailing thereafter. There were anxious moments during the Second World War and the subsequent global economic turmoil, but the Bank had enough resilience to stand up to these challenges and grow bigger. Along the way, nine smaller banks got merged with Vijaya Bank and the process of consolidation got a big boost under Late Mulki Sundar Ram Shetty, who as Chairman during the sixties till late seventies expanded the branch network and ensured the presence of the Bank in every State and Union Territory of our country.  The Bank was nationalized in April 1980 when it had total business of around Rs.800 crore.

The Post- Nationalization era was full of challenges and achievements. Bank continued its policy of growth with consolidation during these years. Business of almost Rs.52000 crore and around 370 branches was added during these 26 years. Several new initiatives were also taken to ensure that the bank moved ahead with times. It adapted itself well to the winds of change brought about by liberalization and raised Public equity of the face value of Rs.200 crore and share premium of Rs.140 crore in two tranches.

It is a kaleidoscope of wonderful images and hard work that comes across as we recount the laurels earned by the Bank during these years.  Awarded the Business Standard Bank of the Year 2004 and with business of almost Rs.54000 crore, the bank is now stronger than ever, as it enters the beginning of another milestone. The reward should go to all the stakeholders in the Bank and not the least, to our seven million accountholders and 11500 staff members.

What according to you are factors, that differentiates Vijaya Bank from others?
Though there are many which come to my mind, I will just mention two or three.  Vijaya Bank is often mentioned as a smaller Public Sector Bank, but the fact is that it is also among the youngest. At 75, not many of our banks had posted a business size of almost Rs.54000 crore which we did as of December 2006. What drives the business in Vijaya Bank is the atmosphere of cordiality among staff and the sense of commitment and perseverance to achieve the results expected of them. Customer satisfaction in Vijaya Bank is hence a philosophy and not just, a part of banking manual.

Secondly, to quote our Honourable Finance Minister from his speech during the valedictory function of our Platinum Jubilee Year celebrations, Vijaya Bank is small; and small is beautiful. But small can grow big and become stronger.  Well, it is a matter of pride growing big and by crossing the Rs.50000 crore business barrier we are already a mid-sized bank. And we are strong too, and that will certainly help us grow bigger.

Thirdly, Vijaya Bank was founded by agriculturists and even to this day retains a strong focus towards rural development and agriculture. 434 out of the 950 branches, that is almost 46 % of the branches of the Bank are located in Rural and Semi-Urban centres.  Credit to Priority Sectors of the economy account for 43.60% of the Net Bank Credit of the Bank   Agriculture Credit continues to grow at a rapid pace and more than doubled during the last couple of years. Bank had surpassed the target for both Agriculture and SME lending during last fiscal and has the potential to grow further, harnessing its strength in rural and semi-urban centres.

How do you see going forward from here? What is your vision for the Bank?
Well, we have very clear goals and sincerely try to achieve them. We had set a Platinum Jubilee business target of Rs.50000 crore for September 2006 and have actually over-reached the target by achieving over Rs.51500 crore. My immediate next goal is a business size of Rs.60000 crore by March 2007, which I want to take to Rs.75000 crore by March 2008 enroute Rs.100000 crore by March 2010, if not by March 2009. Keeping in view our traditional moorings and the emerging potential in rural and semi-urban sectors, I have also set appropriately high growth projections for key sectors like agriculture besides SSI and SME.

Our goal of increasing the number of branches from the present 932 to 1000 by March 2007 has got a boost with the fresh authorizations we have received from RBI recently. I expect similar approvals to come forth for opening our overseas offices. On the technology front, we have planned to enhance our Core Banking Business Coverage to over 80% through 500 outlets by March 2007. We have also planned to increase the number of our net - worked ATMs to 250 by the end of current fiscal.

I must mention that lot of thinking and planning has gone into these projections and we are committed to see that they materialize. As a banker, let me also assure you that we shall always keep raising the bar, and growth in Vijaya bank is a continuous process.

There has been the buzz around about consolidation and strategic alliances in banking sector. Is Vijaya Bank up to something?
I have always maintained that Vijaya Bank will talk about consolidation from a position of strength.  We appreciate that size matters and we are quite happy with the way we are growing.  There are benefits of economy of scale inherent in bigger organizations. New ideas are always welcome and if something comes our way, we shall examine them.  As for strategic alliances, we have on-going service specific tie-up with banks who use our network for payments and services.

Coming to more concrete alliances, I have been in informal discussions with some banks. Such alliances will be of help in certain specific areas for mutual advantage of banks involved, but when it comes to working out the nitty-gritty, such working relations are sustainable only upto a level.  I am therefore willing to approach the matter differently and with a positive frame of mind.

In an environment where Banks make less and less of what they sell to customers, they need to work closely with external partners.  To do so, Banks must ease process integration and data flow with external partners.  What is your Bank’s take on this?
A look at the history of Vijaya Bank will tell you that the Bank has always pioneered the introduction of new products and services – be it ATMs, Credit Cards, Capital Market Service Branches and so on. In the recent past, the Bank has forayed into newer territories such as marketing of Mutual Fund and Insurance products with ease. Diversification into these and other new areas has become a necessity due to the increased attrition level of customers and the narrow spread levels, with which the banks are now accustomed, to operate. I believe that Banks will have to closely work with other channel partners to increasingly derive the benefits from these new lines of businesses.  Data sharing and process integration is also the need of the hour to maximize the benefits to the collaborating Institutions.

India is changing.  Increasing affluence, growing middle class, large presence of younger generation with their expectations and aspirations.  How is Vijaya Bank geared to meet the demands of this large segment? 
Vijaya Bank is gearing up to the needs of the market.  Bank was among the first few public sector banks to implement Core Banking Solution and the system has taken roots. Net Banking and Phone Banking are on the cards. On the products side, apart from the traditional products, we have forayed into marketing of a host of investment products like Mutual Funds, Government bonds, Insurance and other businesses to give the customers the convenience of Banking. We are closing the gaps towards becoming a one-stop shop for all the financial needs of all categories of customers including the youth.

Do you think that, retail banking is the key tool for banks to strengthen the customer base, given the growing consumerism?  What according to you are the safe routes for Banks to move forward in retail banking? 
There is an increase in credit-led consumption and the Banks have to make investment in increasing their retail business.  The market is growing at a rapid pace and there exists immense potential for banks.  The success of retail lending would depend on the quality of credit analysis, credit management, collection process, maintenance of database and most importantly the adherence with KYC norms.

What better role banks can play in servicing the retail banking customers?  Do you think banks have to be more imaginative, technology-centric and forward looking towards meeting the retail needs of new generation customers?
I believe that banks should move towards ‘Convenience Banking’ covering a gamut of services such as payment of bills, transfer of funds etc.   With the changing demographics, Banks would have a large number of younger customers who are less patient. We need to make it convenient for them to make their financial transactions.  Further, there is huge scope for offering financial planning advice, given the level of ignorance that exists about financial products in the market today.

Do you think market research is the key to identifying the customer need and preferences in retail business?
Market research is a key success factor in a competitive market. Research should aim at identifying the customer, his needs, his expectations.  Banking industry does not easily allow us to leverage product differentiation for competitive advantage. It is therefore necessary for us to build higher degree of service differentiation through identifying customer needs and expectations. Bankers have a special feel of the pulse of the market and customers, and they get accustomed to customer needs and preferences, that much faster.

It is said that the present generation prefers to do banking through cards and has no time to visit the bank branch. Do you agree?
I belong to a different school of banking, which believes that the customer at our premises is the king. I believe in interacting with and understanding my clients and knowing them personally. There are modern conveniences, which aid the banking processes but not the banker – customer interaction. Though many may differ, the sight of the banking hall filled with customers, doing a variety of transactions is a sight to behold and in my view, the customer who walks in to greet and enquire your well being is the greatest asset for any bank.

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