Growth in retail customer base has been 27% CAGR in 5 years

Retail banking is growing very fast. How is Axis Bank poised to leverage this?

Retailisation has always been at the core of our vision. Our growth trajectory over the last five years, reiterates our commitment to continue expanding the retail business across assets, liabilities and fees. The buoyancy in the industry and consumer confidence index only augurs better times ahead for us. We strongly believe that digitisation is hygiene, not a delight any more and hence we would pivot all products, services and processes which aren’t native to digital. Payments would continue to be a predominant lever in this space.While we’ll continue augmenting our offline distribution and digital channels, our focus going forward would be to ‘own’ each customer experience and create connected experiences.

Though you are giving lot of thrust to retail banking, your bAxis Bank has seen only steady progress in the retail business — six years ago, 20% of assets belonged to this segment; today it is about 45%. Why this change now?

We have organically built ourselves as a market leader in retail franchise. With proliferation of technology and digital, one could expect a long tail strategy to reach otherwise niche segments, in addition to reaching the mass through branch expansion. The growth in the retail customer base has been strong at 27% CAGR and so has been our market share since 2012. Distribution combined with product capabilities and digital thought leadership has contributed to strengthening our market share in retail, which today stands at 46-48% across advances, deposits and fee income.

With disposable income levels rising and consumption going up, are you witnessing a commensurate rise in retail loans? Your retail customer base has grown 14% between 2013-2017.

Factors like increased disposable income, increased discretionary spends and high consumer confidence index did have a positive impact across our retail businesses including payments. These factors combined with effective use of big data and analytics help us offer right products at the right time to customers across channels, even at branches. We’ve doubled our cross-sell ratio over past five years and it’ll continue to get better as we strengthen our data and digital capabilities in coming years.

Your portfolio has been traditionally heavy on home loans. Are you looking to change your portfolio mix?

Our retail portfolio has significantly diversified over time. Five years ago, mortgage was the key growth driver, dominating the portfolio at 60% but we’ve been diversifying the retail loan book across non-mortgage segments since then, prompting a decrease in the share of home loans from 54% in FY13 to 44% in FY17. Our new drivers of growth to broaden the customer base are education loans, small business banking loans, personal loans and MFI retail loans. We already have a customer base of 1 million MFI loans.

Affordable housing recently go a major boost from the Government. Are you planning to separate your major resources in this segment for affordable housing?

Affordable housing has been a major focus area for the bank since 2014. An industry first, Asha Home Loan was launched in April 2014 and since then we’ve already handed over keys to 32,000 families. We are also working with the government on multiple Credit Linked Subsidy Scheme (CLSS) programs. We firmly believe that there is a large, genuine and mostly unmet need for affordable housing and the government’s thrust and commitment towards this is noteworthy. The bank has been at the forefront of fostering an ecosystem for credit delivery to this segment and continues to see this as an opportunity to profitably aid the nation in sustainable development.

How has the shift from the corporate to retail loan book been?

We’ve built a strong retail franchise in the last five years across assets, liabilities, payments and fees which has triggered a shift in contribution of retail overall in the bank. Retail loans per se have grown at 28% CAGR over the past five years and now contribute to 46% of overall loan book. We have diversified our portfolio from mortgage to autos (growing at >35% over the past two years) and unsecured loans (40% growth over the past two years). You’ll see further shift in the portfolio mix as we start to focus on new segments. While we’ll continue to focus on improving the quality and reducing the concentration risk of corporate loan book, the new drivers of growth there would be transaction banking fee and working capital loans.

With regard to MSME and SME lending, we’ve a variant called small business banking loan. We aspire to grow our SBB book three times by 2019. SME lending continues to be integral — advances grew 10% year-on-year taking the share of SME advances to total advances at 13%.

You said that your retail businesses grew steadily and there was healthy growth in both retail deposits and loans, supported by an expanding network that remains critical to its retail franchise? Can you elaborate?

While our digital penetration (currently at 33%), there’s still a large segment of consumers who rely solely on branches and ATMs for their banking needs, particularly account opening. This consumer behaviour has a huge imperative on our acquisition strategy, hence we are committed to increase branch presence. So, while our physical presence is imperative, we continue to invest in sophisticated data infrastructure to leverage the power of data in an unprecedented way. In FY17, 50% of overall retail advances sourcing was through bank branches. The superior growth in retail loan product distribution was achieved by deepening business relationships within existing branches, coupled with expansion in new geographies.

One of the key strengths the retail portfolio is focusing on is the financially excluded section. How have you used technology to bring the underserved into mainstream banking?

We believe that financial literacy and financial inclusion are closely linked. We have undertaken a ‘Digi-Prayas’ initiative to impart financial literacy to 80,000 people across the country. The initiative supports select villages across the country to be financially literate, digitally aware, adopt and be active on various modes of digital banking like Mobile, UPI and USSD based banking. As part of the program, the bank is also setting up a digital banking ecosystem comprising of Business Correspondents (BCs), EDC/POS devices, Micro ATMs in these villages. We have also been conducting Financial Literacy Camps and have covered over 2 lakh rural people during the last financial year.

In our efforts to bring more people under the digital umbrella, we have launched Axis OK, a multilingual mobile banking app which works seamlessly on feature phones and doesn’t require internet connectivity.