Tag: Managing Director and CEO

Focus is to strengthen internal checks and balances: HDFC Bank MD & CEO

Banking & Finance

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Taking cognizance of the recent issue of mis-selling of GPS products along with car loans, HDFC Bank is working on more controls to ensure such problems do not recur.

“I am personally determined to fix this. At an organisational level there is a greater focus on the role of Credit, Risk, Compliance, Audit and other enabling functions so that our checks and balances get strengthened,” said Sashidhar Jagdishan, Managing Director and CEO, HDFC Bank.

In his message to shareholders in the bank’s Annual Report 2020-21, Jagdishan said the lender has over the last year put in place a systemic way of measuring customer experience by adopting the Net Promoter System. This would enable it to get customer feedback post transactions.

The Reserve Bank of India had on May 28 imposed a monetary penalty of ₹10 crore on the private sector lender.

HDFC Bank has also said it will be refunding the GPS device commission to auto loan customers who availed of the devices as a part of the auto loan funding during fiscal years 2013-14 to fiscal year 2019-20.

Jagdishan said that for many years the bank had been bundling the financing of GPS systems and cars. “The teams believed this was a routine lending activity. Also, a particular vendor had entered into an arrangement with us directly,” he said.

After the whistleblower complaint, the bank conducted an enquiry and basis the findings took necessary actions against the involved employees including termination of their services and also terminated the arrangement with the vendor.

“Reinforcing the three Cs: Culture, Conscience and Customers across the organisation is a clear focus area for both me and the Bank,” Jagdishan stressed.

Highlighting his other focus areas, he said HDFC Bank is working to augment its digital capacities post outages in its mobile and net banking services.

“The regulator also appointed a third party audit of our IT systems. This audit is now over and the report has been submitted to the regulator. We now await the decision from the RBI,” he said.

Strategy

In terms of the expansion strategy, Jagdishan said the bank has created a new business segment of Commercial (MSME) and Rural Banking to capture the next wave of growth.

“We will continue to strengthen our leadership position in the payments business and retail assets business and have added Wealth Management and Private Banking as a core focus area for us,” he said, adding that it will also focus on the Corporate Cluster and Government Business to increase penetration.

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The outlook is uncertain but use of digital will keep increasing: Tarun Chugh

Banking & Finance

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It is an uncertain time for the life insurance sector amidst the ongoing second wave of the Covid-19 pandemic and forecast of a third wave, said Tarun Chugh, Managing Director and CEO, Bajaj Allianz Life Insurance. In an interview with BusinessLine, he said that while the industry is expecting higher claims, it is not much of a concern. Excerpts:

What is your outlook for this year?

It is uncertain at this point of time. Normally, when we start the first quarter, we are clear about the strategy, but it is an uncertain time this year given how things have panned out in May. It is very difficult to forecast anything. This year, we are going more with scenario planning and not a forecast of the year as we don’t know when this wave will end and then there is a forecast of a third wave. The only thing we are certain about is that the usage of digital will keep increasing and we expect customers to still get life insurance in their portfolio because of the desire to cover risks.

Are high mortality claims an issue for the life insurance industry?

In respect to Covid claims, Bajaj Allianz Life has settled over 1,300 claims amounting to more than ₹74 crore. We are sensing that there will be higher mortality and impact on some claims. But last year too, we didn’t get the claims very early. It takes families some time to recover. But it is not a concern for the industry. All companies are comfortably placed in reserves. This year’s number will take a hit but nothing beyond that.

What is your strategy for the year?

Our first focus area is employee safety. We will be able to launch an employee vaccination programme soon. We are also focussing on growing our digital assets. We are also focussing on keeping our branches open and about 80 per cent of our branches are still open but with very limited staff.

How Bajaj Allianz Life’s agency channel revved up to face pandemic woes

What are the products that are seeing demand?

Unlike last year, all products are in demand unlike this year. May has not been a great month due to the lockdown. However, the uptake of term and guaranteed products continues. This time, since markets are doing well, ULIPs are also popular. The Budget proposal has not impacted ULIPs too much. We have seen an uptick in ULIPs less than Rs 2.5 lakh and some dip in above Rs 2.5 lakh but not significant. There is just a three to four per cent shift. The number of customers buying ULIPs less than Rs 2.5 lakh has gone up.

Sales of ULIPs are likely to start picking up: Tarun Chugh

How have life insures made underwriting norms tougher post Covid?

It has been a tough year for claims and underwriting has become stricter. For example, we have added a Covid questionnaire. But if somebody goes for their medicals and submits documents properly and fills up the Covid questionnaire, there is not so much of an issue. For people who have had Covid, we tell them to wait for 90 days and then apply for life insurance.

Is another round of hike in term insurance rates expected?

In the last 15 to 20 year, rates for term insurance have come down significantly. The industry had hit the bottom in terms of pricing and a correction was due and Covid became the right time for the price hike. I won’t be surprised if there is a slight price hike now as well but we will have to wait and watch. The increase will vary from insurer to insurer.

Are you launching any new products?

We recently launched our pension plan and that has done very well, particularly as in pensions, we don’t need to get any medicals done and the age group of above 45 has a lot more money. This has surprised us a lot in its uptake and about 12 per cent to 13 per cent of our entire business is coming from pensions.

Any plans to use the higher foreign direct investment cap for the insurance sector?

It is more of a shareholder matter and there has not been any move in that direction. We are fully capitalised, we have the highest amount of capital and reserves. There is no requirement of money.

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Q1 is challenging but we expect 3 good quarters this fiscal: Ujjivan SFB

Banking & Finance

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Even as the second wave of Covid-19 infections affects collection efficiencies and hampers credit demand, Ujjivan Small Finance Bank is hopeful of a recovery by June-end.

“We are hopeful that now that cases have started to decline, the situation should become normal in another 30 days or by the end of June, and there would be a gradual restoration of business activities, including in rural areas,” said Nitin Chugh, Managing Director and CEO, Ujjivan SFB.

“This quarter is going to be challenging but we are hopeful that as things return to normal, hopefully by the end of the quarter, we should have three good quarters in the year,” he told BusinessLine.

The SFB reported 94 per cent collection efficiency in March this year, though it has declined to 89 per cent in April 2021.

“May collection efficiency is lower than that in April. We will be able to see some recovery by the month-end,” Chugh said, but added that the level of infections amongst customers and the bank’s staff is high compared to the last time.

Rising infections and localised lockdowns have also impacted credit demand.

“We are cautious in credit disbursement, but there has also been a collapse of demand, people are not willing to meet anybody and are not doing business,” he noted.

The bank’s disbursement for the fourth quarter of 2020-21 stood at ₹4,274 crore as against ₹3,254 crore a year ago.

On concerns about asset quality, Chugh said Ujjivan SFB did not exect gross non-performing assets to come down and it was well within estimates.

The bank’s GNPA shot up to Rs 1,070.6 crore or 7.07 per cent of gross advances as on March 31, 2021 as against 0.97 per cent on March 31, 2020.

“Our proforma GNPA for December was 4.84 per cent. The accounts which were already stressed by that time did not recover fully well, we offered restructuring to a part of the better quality portfolio but there were customers who were unable to pay,” he said, adding the lender had also highlighted areas such as Maharashtra, West Bengal, Assam.

“In our estimate, GNPA was not expected to come down, it is well within our estimate. If we had resorted to write-offs, it would have been in the range of 5 to 5.5 per cent,” he said.

The bank is also looking to launch gold loans as well as credit cards on a white label basis this fiscal.

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Budget proposal has not affected ULIP segment of ICICI Pru Life: MD and CEO

Banking & Finance

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Optimistic about the outlook for the life insurance industry, NS Kannan, Managing Director and CEO, ICICI Prudential Life Insurance, said as of now Covid-related claims for the sector are under control. In an interview with BusinessLine, he said while there continues to be demand for protection and health products, underwriting norms have become stricter for retail protection. Excerpts:

What is your outlook for the life insurance sector?

Amidst the pandemic, life insurance sector ended in the growth path. I expect the industry will see double-digit growth. We will have to watch how the pandemic develops but we will get back in line with nominal GDP growth of about 15 per cent.

Is the surge in Covid 19 infections a cause for concern for the sector?

Our industry’s claims will be linked to overall mortality of the insured population, which is very much under check. I don’t think it will be a big concern for the industry. We have increased the provision by another ₹33 crore in case some deaths have not been reported to us. Also, given the emergence of the second wave, we decided to be prudent and create a provision of another ₹299 crore. So, as of today, we are carrying a provision of ₹332 crore.

Number of life insurance policies dips in FY21; group covers lead the fall

How many Covid-related claims has the company paid?

We have reported 2,500 lives we had claims on in terms of number of deaths in our portfolio. Net of reinsurance, we had to pay out about ₹264 crore as claims.

ELSS vs ULIP: Which suits you best

What kind of products do you think there will be more demand for?

There has been a lot of demand for protection products and also health insurance products we are allowed to do. There is also momentum in group term insurance. The only caveat is that we are not able to entirely fulfil the entire demand. Given the pandemic one has to be careful about underwriting. Also, for large insurance, we need the support of reinsurers and they are also focussed on proper underwriting. Underwriting standards have become tougher. There is also still a bit of friction in terms of medical examination, which is needed for higher value insurance. This has slowed down the process of issuance. Demand is up but in retail protection there are some supply-side constraints.

ICICI Pru MF launches new fund of funds

Credit life, which is the second segment of protection, had got impacted in the first half but has come back in the second half because banks and NBFCs have started disbursements for retail home loans and other loans. Group term has been a huge opportunity and we had about 100 per cent growth in the segment.

Has there been an impact of the Budget proposal on ULIPs?

As an industry, we have moved away from tax-based selling to goal-based selling. Second, ULIP is a powerful product, allowing customers to take advantage of market movements in a transparent and tax-effective manner. Even in the new regime, customers can invest up to ₹2.5 lakh without tax implications. The new regime was in place from February 1 and there were two full months of this impact. But in our case, ULIP segment has grown 11 per cent year-on-year in the fourth quarter. Empirical evidence of the two months indicates there is no impact at all. As long as long-term investments are on the same platform across mutual funds and insurance, there is nothing to worry.

What is your strategy, going ahead?

Despite the pandemic, we are not changing our strategy to double our value of new business to about ₹2,650 crore by 2023. We will continue to pursue it through the 4Ps of premium growth, protection business growth, persistency improvement and productivity enhancement. Our focus will be on top-line growth. In the fourth quarter, we are firmly back on the growth back and that gives us confidence. We have about 600 new partners and we added seven significant banks last year. On the product side, we have a much diversified product mix. So all this gives us a lot of confidence that we can pursue top-line growth and expand the VNB.

Term insurance rates have been increased by some insurers. Will there be more repricing with the second wave?

The increase in term insurance rates was driven largely by reinsurers increasing the pricing. To the extent of reinsurance pricing, we passed it on in the month of July (last year). We don’t have any proposal to further increase pricing.

We don’t know how the second wave will emerge. We have to wait and see. World over, I don’t think the conclusion has emerged so strongly regarding the lingering or long-term mortality impact of the pandemic.

How do you view the increased FDI limit for the sector?

We wholeheartedly welcome the move as a company and industry. Recently, the draft rules were gazetted, which are reasonable and easy conditions to comply with. Insurance penetration is very low and it being a regulated business there will always be strict capital requirements for the industry and so foreign capital is always welcome. For us, it is a shareholder issue and not a company issue. As an insurance company, we don’t require any capital. We are quite well-capitalised with 217 per cent solvency ratio. We have also increased about ₹1,200 crore of Tier 2 capital.

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Govt must think of many AIFs, rather than one bad bank: Kotak

Banking & Finance

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Instead of setting up just a single bad bank, the Centre should consider floating multiple such outfits in the form of Alternate Infrastructure Funds, Uday Kotak, Managing Director and CEO, Kotak Mahindra Bank, and President, Confederation of Indian Industry, said. The veteran banker also suggested the setting up of a development financial institution for infrastructure, while speaking at BusinessLine’s Countdown to Budget 2021 event on Wednesday.

“One of the suggestions we have made from the CII is rather than thinking about just one single bad bank, where you have a big challenge of clearing price, allow floatation of multiple bad banks in the form of Alternate Infrastructure Funds registered under SEBI. They should also be allowed to buy, in addition to securities, loans from banks and NBFCs balance-sheets and to be considered as part of the permitted activity for AIFs,” Kotak said while delivering the keynote address at the HDFC Bank powered conference themed ‘Unleashing the animal spirit in a pandemic hit economy’ .

‘Needed, a DFI’

He also suggested setting up of a development financial institutions.“The reason is if you look at NABARD, which has been a success in rural and agriculture, or SIDBI in the area of MSMEs, the time has come for a massive infra push for India’s growth transformation and through that creating a reverse demand for various other products and services. A DFI, with a creative way of funding that institution with long-term money, is something that may be appropriate,” he said.

Budget 2021-22, which is being presented amidst the Covid-19 pandemic, is not just about arithmetic but also about being a policy document that spells out a new future for the country, Kotak said.

“We are in the best of times, the worst of times…the pandemic is a once-in-a-hundred year event. For all the challenges it has created to lives and livelihood, it is also the best time for us to grasp the opportunity of a transforming world economy, Indian economy, and society,” Kotak said.

Five focus areas

He underlined five key focus areas that the Budget should focus on. These include infrastructure, healthcare, education, sustainability, and defence. Additionally, there is a need for a continued push in three areas of private investments, jobs and digitisation.

Finance Minister Nirmala Sitharaman, who will present the Budget on February 1, has promised a “never before” like Union Budget as the government looks to boost growth amidst the pandemic.

“I genuinely hope this Budget will live up to the expectation that it is a Budget like never before,” Kotak said.

He also called for a gradual normalisation of the fiscal deficit over a three-year period and recommended a stable tax and interest rate regime.

 

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