MC Exclusive | Fundamental building blocks won’t change: DCB Bank chief Praveen Kutty

You're two quarters old now in terms of results and the lucky internal candidate who made it as a CEO after having worked with the bank for over 17 years…

I feel I was well prepared for this move, thanks to our previous CEO, Murali. We had a long run and a set of folks were groomed for the top job for a long period of time. What I realised is however much is the preparation, it is a very different world when you actually take over the reins. The respect for my (former) boss increased substantially overnight, because I realised the extent of the responsibilities that he has been taking in the last 15 years and I did not appreciate this much till I really sat down in the chair! It has given me a phenomenal opportunity to steer a young, ambitious, workforce to take the bank to an altogether different level. The fact that I’ve been doing senior roles, across the bank, for a long period of time gives a comfort with most of the people. But I do spend a considerable time, including weekends, traveling and doing town halls, reiterating the key messages to multiple people across the 20 states where we have a presence.

What changes would you want to bring to the bank?

Reduce the time between conception of an idea and implementation of the idea. We need to build that urgency into the company. In fact, we have started doing this. Usually, we give our annual raises in May or in June. The first thing we did even before I could formally assume the role is that we ensured that soon as the March quarter results were declared, all the performance appraisals were done and rewards were credited to the bank accounts of employees in April. This was the first step in walking the talk and this was an action which positively impacted every employee.

In terms of business, the fundamental building blocks of the bank will remain same. I've been a part of DCB Bank for 17 years and if really wanted to make some changes, I would have made it long ago. We will continue to be retail-focused, concentrate on small-ticket loans, continue to be granular and focus on secured loans. We are not going to stray from this path.

If I must really explain what may change, I’d say our engagement with customers. Customers usually interact with the bank once or twice; while buying the product and then at the time of closure. But there are various avenues for engagement, either digitally or physically. I'm putting a lot of emphasis on ensuring transactions happen as we want inflows and outflows. For example, take a customer who has taken a loan against self-occupied residential property and he runs a welding shop. While he has an LAP with us, he may be banking with another bank for his business. So why not ask him to transact with us? Term loan products do not give you much avenue for interactions, hence there is increased focus on overdraft facilities. We believe this will lead to better stickiness, more products per customer and finally making DCB Bank the primary bank of the customer.

Usually, when a new CEO steps in, there is a spike in provision cost and some amount of clean up. We are yet to see that with DCB Bank.

We were doing what is right for the business and the leadership transition is just a phase. The running of the business continues. Leadership transition does not have a bearing on the underlying continuity and the perpetuity of the kind of business that we are running. Regardless of who's leading the company, the underlying philosophy of what kind of bank we want to be, remains the same.

Your predecessor is remembered as DCB’s turnaround man. How would you want to be known?

I just want the bank to consistently grow and build a very strong franchise. It will not be about me at all. It will be about DCB Bank.

Now that your loan book is about Rs 70,000 crore, what next?

A 20 percent growth per annum seems very much feasible for us, considering our size, the environment, and the segment that we operate in. In about three and a half years, we should be able to double the book.

Would you look at inorganic options for this?

Organic is important, but partnerships are equally important. We really stress on the partnerships on both sides balance sheet. We have quite a lot of co-lending relationships. For inorganic options, either the geography, or the segment, or the product has to be different. We ensure that we avoid a situation whereby our partners feel that their toes are getting stepped upon.

The bank’s gross NPA bandwidth has always been in the 3–4 percent level. Is that something you are comfortable with?

We want to bring it down. Gross NPA hasn’t tapered after Covid for two reasons. One is that during Covid we didn't find any comfort in doing too many categories of retail loans. We ramped up on gold loans after Covid. Second, in November 2021, we had the rollout of co-lending guidelines. We started the first co-lending on the gold business which is now a reasonably large part of the co-lending book. Thus, between organic and co-lending put together, we have built a fairly large gold loan book.

We are catering to a class of customers who may not have the same discipline of repayment as the rest of the people. The threat of auction is the single largest impulse to get the interest and/or installment servicing done. We are working hard on educating these customers. What is a redeeming feature, however, is that our recovery rates of NPA are also very high, indicating low loss given defaults. Having said that, even the non-gold loan fresh slippages are not at the rate at which I would want them to be. This is something we are working on.

Why isn’t margins reflecting the slant taken in your assets side?

It has got to do more with cost of funds than yield. But I’d agree with you, that the average yield is dipping. This is owing to three items - some one-offs interest refunds that we had to make, penal interest being removed and penal charges constituted and the third is the increased mix of co-lending in the overall loan disbursal. When share of co-lending increases, it results in lower yield.

Cost of funds is stabilising. We have seen that in the September quarter. We will wait to see how it shapes up.

While the bank is well capitalised now, law allows your promoter to take their stake up to 26 percent. Would AKFED consider it?

Our promoter has shown what I would call a symbolic gesture by infusing $10 million into the bank for the first time in over 15 years. Once that comes in, promoter’s stake will be above the 15 percent mark. Then, over the course of time, you will continue see more of interest coming in from everybody, including the promoter.