Corporation Bank chairman and managing director Ramnath Pradeep laid bare his action plan to make his bank a front-ranking national player in an exclusive interview with Kumar Shankar Roy. While the corporate sector is a key part of his business, Pradeep said his bank is branching out to the rural SHG sector, urban HNI pockets and retail mass banking through an efficient ATM network in a new three-pronged strategy to grow into a Rs 500,000 crore banking giant in the next four years. Excerpts:-

Tell us about the bank’s journey.

Corporation Bank started with a small beginning. In 1906, when the bank started functioning, the initial capital with us was just Rs 5,000. At the end of the first day, the resources stood at 38 rupees-13 an­nas-2 pies. Today, we have busine­sses of over Rs 1,75,000 crore after 105 years. During the first half of the previous decade, our business doubled. Thereafter, it has been doubl­ing every three years. The growth of over 25 per cent every year has be­en possible due to the ability of our employees to service and our expa­nsion into other geographies with a strong foothold in south. This has led to significant customer additio­ns. In 1991, the bank came out wi­th a unique offering — cash mana­gement services. Corporation Bank was the first to enter this domain and naturally, a major part of our revenues came from this segment.

As a bank, we have focussed on financial inclusion. We achieved our financial inclusion targets 15 months ahead of schedule. With the help of the ICT model and the business correspondent (BC) mod­el based on self-help groups (SH­Gs), we managed to reach high levels of participation in villages that were awarded to the bank. Today we have more than 1,800 villages where our model is in place. Eighty per cent of BCs are women, mainly housewives and teachers. They ha­ve been able to identify good SHGs. Women are better savers and mostly control finances. Our automated loan sanction facility for daily ne­eds has been well received. However, incomes come on a weekly or monthly basis. This is the reason we felt that an overdraft facility was required with which we can give Rs 500-2,000. This also saves them from local moneylenders. When villagers get their incomes from Nrega, they pay back.

You have laid out an elaborate Rs 500,000 crore business plan by 2014-2015. Do you have the eco­system to expect that growth?

The board has approved a plan to grow our business from Rs 1,75,000 crore to greater proportions. We will open around 200 br­anches a year in tier II and tier III cities, where growth is taking place. Savings and Casa deposits are expected to be much more in these growth centres. Another big focus area is retail and SME. We have started Commonwealth Youth SME centres, where we will play a gre­ater role in terms of training, advising on business suitability, knowledge sharing on a debt-equity mix basis. We will be coordinating and cooperating with the Commonwe­alth Secretariat to create avenues for capacity building. The first centre has been started in Chandigarh while another is in Udipi. We have already done a joint survey. While companies remain a key part of our business, we have realised that the scope of business is equally big in the retail and SME segments.

Is technology going to play a major part in this transformation?

We are yet to harness technology to the fullest. What we have done so far is adopt technology that is flexible but doesn’t have the ‘open’ platform. We are planning to switch ov­er to an open platform, which is more scalable. We are in talks with our existing vendor to have a system that can handle new business realities such as more customers, more transactions and more channels. We are also examining wheth­er we can use the existing technology, which is exhausted to a large extent, so that it can keep pace with new requirements. Consultants are already examining these issues. If we feel the need to change technology, the backend will probably need to be changed first while the front-end will remain as it is. If all goes as planned, the back-end will be cha­nged over the next three months.

Another area we are looking at is the product range. At present, we have a lot of products. I am planni­ng to examine the products and if deemed necessary, go for consolidation. As you may know, over a period of time, some products have outlived their usability. Such products could be merged, consolidated and relaunched. This is true for pa­yments and services, wh­ere there is huge growth happening.

The bank is clear in its focus on high net-worth individuals. What are you doing on that front?

We have started priority banking in Bangalore and we will expand this to other locations where there are HNI population, such as Delhi and Mumbai. We also plan to start an advisory service for HNI clients. We have not yet decided whether we will work with a partner or do it internally.

We understand that Corporation Bank is bullish on payment and settlement potential. Why?

Yes, the point-of-sale (POS) machines potential will also be tapped. The penetration of plastic money has happened, but a wide of array of service possibilities hasn’t been tapped. We are planning to have our own payment and settlement system through which we can hook the rural population.

To small business owners, a POS device seems like an extra cost. If I can develop a model for him that is cost-effective, he will allow us to put a POS machine. If we as a bank are able to finance their inventory, particularly furnishing him with short-term capital, this will help in taking care of daily requirements while cash will flow back through the system on a daily basis. It will likely be a per transaction model, where he pays an amount per transaction. If I can give him one month’s collection in advance, he does not need to spend time and effort on cash management. The bank can fund the buying of the device and we can give the business owner 12 months to pay back.

I am also planning to make ATMs a profit centre. An ever-increasing number of people are usi­ng ATMs, but they are not bank-sp­ecific. We will deploy 2,000 ATMs before December 2011. The contract has already been awarded and work has begun. The earlier model of branch-ATM model was not in order as there were two channels side by side. The 2,000 new ATMs will all be off-site. In terms of bran­ches, we will install self-operating machines that can accept cash through which people can pay bills.

After the recent RBI policy action, when will the bank hike its rates?

Today liquidity is not the problem. But cost is. Now inflation will be in the range of 5.5 per cent to 7.5 per cent. While we are in a position to manage, if my costs increase then I need to remain sustainable. I know if we increase lending rates, the cycle plays out and at the end the finished product becomes expensive. As a bank, we sometimes do not immediately pass on such hikes to customers. We decided that up to March 31, we will not burden customers. While we may be able to absorb 10 to 20 basis points cut in profitability now, the same may not hold good in the long run. I have to protect margins also. So we may have to take a call on both lending and deposit rates in the second week of April.