A week before I'm scheduled to meet Chanda Kochhar, word about an unprecedented event spooked India's banking system and its customers. Worming in through the complex networks and protocols that make modern banking work, unknown hackers had performed a scary trick. About ₹1.3 crore evaporated from accounts in India as cards, even as they sat snugly in customers' wallets, were swiped in faraway China and the US. About 3.2 million accounts across 16 Indian banks were exposed to the vulnerability. My Facebook timeline brought alive the horror of banking fraud as two friends chronicled the parlays with the banks and the cops to 'reverse the charge', as they call it in banking parlance.
The incident was scary for banks. The vulnerability was zeroed in—it occurred on ATMs made by a certain company and used by a certain bank. But customers can use ATMs of any bank that is convenient. Thus, for their money to remain safe, it's suddenly not sufficient to secure your own systems.
My breakfast guest this morning is the MD and CEO of ICICI Bank, India's largest private bank by assets. Time magazine counted her among the 100 most influential people in the world last year. If this episode and its fallout are playing on her mind, the shadows are not showing on her face. The 54-year-old radiates an inner calm, seems unreasonably relaxed this morning, and her responses are exactly what you would want to hear from your banker—measured, thorough, deliberate and cautious to a fault.
"The weakest link impacts the chain. Since these are open platforms today, any customer that uses anybody else's ATM will also get impacted. So yes, it just brings home the point that security protocols are that much more important because we are living in an interconnected world," Kochhar says.
We are meeting at a private suite at the Taj Mahal Palace Hotel in Mumbai, the much-photographed city landmark that has been receiving guests since 1903. The suite offers a sun-drenched view of the Gateway of India and boats of all shapes and sizes bobbing all along the seafront.
Kochhar opts for poha, the staple Maharashtrian breakfast made with pressed rice, boiled potatoes and onions, and a cappuccino. I get upma with coconut chutney, and a cup of Assam tea. The upma, I'm happy to note, is delicious.
Since it's so ubiquitous now, we don't realize just how recent a phenomenon private modern retail banking in India is.
When Kochhar joined ICICI as a management trainee in 1984, it was not a bank at all. In fact, retail lending would not begin till a decade later. Kochhar says that her move to retail banking was a turning point in her life.
"For the previous many years of my career, I had been a corporate banker. ICICI Bank had been a corporate bank. Retail lending was new for the country. It was of course very new for ICICI and it was entirely new for me... I was handling more than 50% of ICICI Ltd's book and the profit. To give that up and get on to an entirely new field was a big moment."
The big moment was in the mid-1990s. Customers loved ICICI Bank and its cohort of new private banks that offered clean branches, friendly tellers and executives, and modern technology at par with banks anywhere in the world. Branches and ATMs mushroomed, customer deposits and business boomed. Eventually, ICICI Ltd merged itself with its spectacularly successful offspring, ICICI Bank.
In the duration of her career—and she's far from done—Kochhar has seen banking, as well as India's relationship with money, change dramatically.
"When I joined ICICI, lending was actually very pure and simple. Either you would give project loans or working capital. And the consumers would do all their transactions from a banking branch. Today, almost 95% of the transactions consumers do with us are done outside the branch. The consumers want to do transactions on the go, in a digital form, on social media, wherever they are living their lives."
Habits of spending and saving have also changed. Borrowing to spend on a holiday, for instance, was earlier unthinkable.
"People would save every year during their working life and they would aspire to have enough money to buy a home when they retired. Today we are at a situation where you know both the husband and wife would be working. They are very comfortable putting aside at least one salary to pay the EMIs. They want to buy a home the moment they are married. I think they are comfortable even taking a loan for certain things like holidays."
Watch Chanda Kochhar answer our rapid fire round.
But now all the innovation in fintech, or financial technology, seems to be happening in the labs of digital startups. Digital wallet companies like Paytm have emerged as a force in everyday transactions and have managed to acquire hundreds of millions of customers in half a decade. There are now startups that lend money based on a consumer's online and social profile—they call it digital exhaust. This is the kind of stuff that can give a conventional banker pause. And there are of course technologies like blockchain that could fundamentally alter the architecture of banking transactions.
What makes you think banks can't be nimble?Chanda Kochhar
Can large banks like ICICI compete with innovative startups and win? Startups can be quick and nimble, whereas a bank with $100 billion in assets must test a technology extensively before rolling it out. And how do you deal with competitors for segments of your business that rise out of unexpected corners?
"What makes you think banks can't be nimble?" counters Kochhar. "I think one of the very important DNAs of ICICI always has been its agility... its ability to foresee what are the changes that are coming and to keep the organisation, the products, the services, the channels, everything ready in anticipation of that change."
She says her bank has been at the forefront of every major new tech paradigm—ATMs, internet banking, mobile banking, digital wallets and so on—that there is no good reason to worry about losing out in another round of tech evolution. She believes the bank is well poised for change. In fact, she says, a large bank has an advantage because it has multiple existing relationships with the customer whose trust it already has.
"I would never say banks should never get paranoid about these innovations that take place outside the banking system. But banks can also view these as possible innovations that the banks can themselves offer to customers and actually build even stronger, longer term relationships with them."
She said her bank is constantly looking at new technologies such as blockchain. But as the previous fortnight's events showed, balancing new technology adoption and security is always going to be challenging for banks as hackers keep chipping away at their defences.
I ask her about the more systemic crisis of non-performing assets (NPA), jargon for loans gone bad, that has been roiling India's banking system. Were there a few moments of panic for ICICI Bank?
She gives me a long answer, with some key messages.
You panic if you don't see something coming. But as bankers, we have been watching the (NPA) situation evolve for some time.Chanda Kochhar
India's banking system is far too robust. So there is no crisis affecting it fundamentally.
The NPA crisis built up over a period of time due to two factors. One is that subsequent to a round of rapid infrastructure and industrial growth in 2010-2012 in India, the external environment and commodity prices tanked, which affected project viability and cash flows. Second is our own internal issues, where projects were promised regulatory and environment clearances and backward linkages such as coal blocks, which did not materialize. This is what caused stress to build up in the system.
But now the focus is on resolution, which means sale of assets or restructuring of bad loans to make some recovery possible. Some of the deals you are reading about now are actually part of that process, she says, with a smile. I wonder if she is referring to recent asset sales undertaken by groups such as Essar and Jaypee Group.
But there was no panic.
"You panic if you don't see something coming. But as bankers, we have been watching the situation evolve for some time. We were one of the first banks to change direction as we saw some of these things happening," she says.
Corporate credit was growing at 25% annually in 2012 for ICICI Bank. As the environment turned, the bank cut lending sharply and that figure went down to 8-9% per annum. That figure is still hovering thereabouts, although retail lending is now growing at 20% per annum.
While this dampening of generosity might be essential for banks, I wonder how it will sit with Prime Minister Narendra Modi's Make in India initiative and the overall drive for faster economic growth, more jobs, roads and factories. Without easy credit, none of this is going to be financed.
So is India's banking system out of the woods yet?
She doesn't believe it ever was there in the first place. "Our regulatory requirements have always been very high, very prudent, very strong, whether it's our reserving requirements, whether it's our recognition requirements, whether it's the capital requirements... fundamentally our banking system is very strong."
But she does think there is still a lot of work to be done in recognition (figuring the full extent of bad loans) and resolution, which is basically all the steps required to salvage the value you can from the situation. This can include further lending if a project is close to completion.
I think inflation, if at all, will only undershoot the RBI's target of 5% by March 2017. So, clearly, there is room for more (rate cuts)Chanda Kochhar
Does India have room for more interest rate cuts?
"Yes, because I think the inflation is well under control. I would actually like to compliment the government for all the efforts that they have taken around food grain prices and food grain management. The prices of pulses, vegetables and so on have cooled off, so that side of the inflation is under control as well. I think inflation, if at all, will only undershoot the RBI's target of 5% by March 2017. So, clearly, there is room for more (rate cuts)."
Well, does that mean she agrees with many of former central banker Raghuram Rajan's numerous critics, who felt he was overly cautious in cutting rates?
Kochhar doesn't give a direct answer, saying she doesn't want to talk specifics, but instead talks about how India is in a good position relative to most other major economies on most macroeconomic parameters.
We talk a bit about just how ICICI Bank has managed to groom so many women leaders. Apart from Kochhar, several ICICI alumni—Axis Bank's Shikha Sharma and JP Morgan's Kalpana Morparia, to name just two—play key roles in India's financial services industry.
Kochhar credits key early executives—Narayanan Vaghul and K.V. Kamath, most of all—for the organisation's focus on being what she calls a "gender-neutral meritocracy".
"This has given women the confidence that if they perform, if they work hard and if they are capable they will get their due rewards, and that responsibilities would not be denied to them just because they are women. We give the person the next responsibility or the next reward or for that matter the next reprimand based on the person's capability, performance and potential. We do not then say that this is a woman and she may not be able to do it. And I think this is what has enabled women to perform to their full potential and that is why you have seen women prosper and emerge as leaders."
She says the bank has policies that support the needs specific to women staff, such as flexibility with working from home after a maternity break, greater attention to safety, and so on.
Kochhar explains issues like a good lecturer. Every answer is a holistic one—perspective first, some background and history, followed by an exceedingly non-controversial response to the point raised. But this means that she is eating very little, and knowing she has to speak at a conference immediately after our interview, I feel a little guilty.
A whole lot of focus and tenacity that I have learnt are really from my mother.Chanda Kochhar
What is the best advice she received at ICICI Bank, I ask her. She says it's more an assimilated learning from watching others than a specific advice, but it's the importance of balancing "vision and execution", or keeping an eye on the long term, even while being obsessively focused on the present.
She also learned important life lessons from her mother, who moved the family to Mumbai from Rajasthan after Kochhar's father passed away when she was 13.
"I saw her transform from a simple protected homemaker in a small town in Rajasthan to our protector. She took up a small job and made sure all three of her children completed their education and were settled well in life. It has been the biggest lesson in my life in tenacity and how to overcome challenges rather than allow challenges to overcome you. A whole lot of focus and tenacity that I have learnt are really from her."
Kochhar passed on some of those life lessons to her daughter in a letter that went viral on the internet a few months ago. In it, she talks about not letting stress take over your life. How does she do that?
She says she declutters her mind, focuses on the cause of the stress and tries to resolve that, rather than letting stress spiral into an overwhelming force.
Any stress-busters she uses?
Nothing specific. Her approach is more about using all available opportunities to de-stress. Be it a nice dinner with family or shopping for saris. She is also a huge Bollywood buff and catches almost every movie that comes out. "I kind of take pleasure in these simple things but you know those are the ones that help you keep the balance," she says.
Her taste in saris—which she is seen donning everywhere from presidential banquets to World Economic Forum soirees at Davos—is justly praised. So I summon enough cheek to ask on our readers' behalf where she shops for her saris.
Again, she avoids specifics, but obliges us with the Chanda Kochhar rule for sari shopping: "The trick is to buy saris when you don't need them. If you go looking specifically to buy saris for an occasion just when you need them, you might not find the right ones so easily."