Interview | KVB working on unsecured loan products, to focus on existing clients, says MD & CEO B Ramesh Babu

B. Ramesh Babu, MD & CEO, KVB

Tamil Nadu-based private sector lender Karur Vysya Bank (KVB) on October 19 said it is working on growing the unsecured loan portfolio and will likely focus on existing clients in this segment.

The bank may also launch some unsecured loan products in the micro, small and medium enterprise or MSME segment, said the bank's managing director and chief executive officer (MD and CEO) B Ramesh Babu in an exclusive interview with Moneycontrol.

He added that compliance is important to KVB and has brought in experts from across the industry for that. Edited excerpts:

What is the strategy on unsecured loans?

We are seriously working on these unsecured loans, but it requires a different profile and expertise. A lot of data is available digitally in the system now, which we call surrogate data, which we can use to take a decision about the quality of the customer. We are working along with our analytics. We are going to bring out some products on the unsecured business loans also under MSME.

Many of our current account customers do not have a loan. They are a good source for us because you know the flow of money and the movement of money in the current account.

How critical is compliance and governance in the current environment?

Compliance is a key area for us, we started the journey of compliance many years back. In order to do that we have taken the compliance head from the Axis Bank and he is heading that, and some other domain experts. If you look at the composition of the KVB board, the chairperson of the board is a former executive director of the Reserve Bank of India and executive director of the Bank of Baroda.

Likewise, at every level, because those people who have come from other banks also, give a lot of importance to governance. Governance and compliance is very paramount for the bank, we don't foresee any major issues as far as governance is concerned.

What are the growth targets this year?

We wish to continue the guidance of 14-15 percent growth of total business on a year-on-year basis in this financial year.

You would have seen that our advances growth is 5 percent quarter-on-quarter which annualised may come to 20 percent, and the majority of the growth has come from the RAM (retail, agriculture and MSME) segment. But what we are thinking now is that the deposits, actually the cost of deposits, the majority is coming via the term deposits route, so margins are crucial because our bank has good margins compared to peers.

What is your approach on branch expansion?

There are two ways you need to look at it. In 2023-24, we have planned for around 40 branches. Out of that, 25 branches have already opened in the first half-year. Another 15 branches will open in the second half.

A business correspondent model will be brought in where you will be paying per transaction. So what we are planning this year is to engage around 500 business correspondents.

We prefer semi-urban centres where there is a lot of potential for branch openings, rather than metros. Likewise, many new districts have come up in the south and where we are trying to establish a presence. We are looking at the west—the focus will be first on the south and west.

How is cards business performing?

To some extent, over a period of time, the cards business will come down, because plastic they may not be a necessity. Also, digital cards will come up. This will replace the card business over a period of time. But it may not happen overnight because many people are still comfortable with cards and the privacy, the safety.