ICICI Bank's meteoric rise: Here's how the bank under MD & CEO Sandeep Bakhshi climbed up the BT500 list

Five years ago, Bhadohi in Uttar Pradesh—around 50 km from Varanasi—was a sleepy town, with its hand-woven carpets being its only claim to fame. Small carpet-weaving units were scattered across the region, some struggling to survive while new ones emerged every year. The double jolt from demonetisation and the roll-out of GST also cast a shadow on the economy of this town in southern Uttar Pradesh. As the dust settled, the implementation of GST became a catalyst for the formalisation of the industry. Several fintech and smaller NBFC players descended upon Bhadohi to offer cash-flow lending—which is based on daily earnings instead of balance sheet-based lending—to those who were unbanked and underbanked.

Fast forward to today, and the economy of Bhadohi has taken a new turn. Those once modest mom-and-pop units have evolved into thriving small and medium enterprises (SMEs), thanks to formal credit lines. Bhadohi has also established a foothold in the international carpets market, commanding half of the country’s export of carpets. And one of the lenders that tapped Bhadohi at the right time is ICICI Bank, the country’s second-largest private bank by assets. The micro-markets team at the lender kept a close eye on the town’s progress and established branches and specialised staff to meet its banking requirements. The micro-markets strategy, spearheaded by Sandeep Bakhshi, MD & CEO of ICICI Bank, is a part of the half-a-dozen value drivers identified by the lender that constitute its strategy of taking its entire bouquet of products to consumers. A customer-centric strategy, with a focus on ecosystems, internal cross-functional co-operation, external partnerships, process decongestion and operational flexibility, and integrating technology and digital across organisations are the other five value drivers.

As the saying goes, the proof is in the pudding. And the Mumbai-headquartered bank has climbed the ladder of BT500—the definitive listing of India’s most valuable companies by average market capitalisation—leaving behind giants like HUL and Infosys, who rule their domains, to No. 4, climbing two places from last year. Undoubtedly, the credit entirely goes to the leadership.

When Bakhshi entered the corner office in October 2018, the bank had a lot on its plate, including the departure of MD & CEO Chanda Kochhar due to a conflict of interest in granting loans to Videocon, and a decline in the quality of assets in the corporate book. Since then, the bank’s advances have nearly doubled from Rs 5.12 lakh crore in March 2018 to Rs 10.19 lakh crore in March 2023, while its assets have expanded from Rs 8.79 lakh crore to Rs 15.84 lakh crore. The robust growth in lending books has come with reduced non-performing assets (NPAs). Gross NPAs have plunged from 8.84 per cent to 2.80 per cent in the period, while net NPAs have plunged from 4.77 per cent to 0.48 per cent in the past six years. “Our strategic focus continues to be on growing our core operating profit through a 360-degree customer-centric approach and by serving opportunities across ecosystems and micro-markets,” Bakhshi said in an analyst call in October.

In the competitive banking industry, the bank has improved its net interest margin, or NIM, from 3.23 per cent to 4.48 per cent without compromising on asset quality. It has also been conservative in terms of the provision coverage ratio for assets, which jumped from a low of 60.50 per cent in March 2018 to a high of 82.80 per cent in March 2023. This good performance in assets, loans, costs, and provisions is reflected in its core profits, which catapulted from Rs 18,939 crore in March 2018 to Rs 49,139 crore in March 2023. Its corporate loan book now constitutes high-rated companies that are bringing in robust fee-based income. For precisely this reason, ICICI Bank boasts the highest price-to-book valuation among major banks in India. (See box ‘A Snapshot of Banks’.)

A Ground-up Approach

Let us get back to Bhadohi. ICICI Bank was quick to identify the town as a gold mine and expand its presence in the area. It followed a similar playbook in Maharashtra’s Pune and Tamil Nadu’s textile hub of Tiruppur, among the hundreds of micro-markets that the bank has set up. The micro-market strategy fundamentally arises from the fact that there are many small Indias within India. These markets are handpicked by way of data analytics and market intelligence (straddling geographies like Bhadohi, Pune and Tiruppur), segments like senior citizen, defence, NRI, etc. and sectors like real estate and healthcare. This is followed up with localised strategies with tailored propositions for customers. “The micro-market strategy also helps in marketing campaigns that are targeted at a particular customer segment. We also have local alliances to offer propositions of high relevance to our customers,” says Sandeep Batra, Executive Director at the bank.

There is also a realisation at the bank’s headquarters that it possesses a specific set of skills but not a comprehensive skill set to address the dynamics of the country or the micro-markets. “Our front-line teams are empowered to propose what is needed in their respective micro-markets in terms of branches, people, skill sets etc.,” adds Batra.

The bank has profiled the entire country down to the PIN code level. Currently, there are 19,000 PIN codes in India, comprising 6,000-7,000 rural PIN codes and 12,000 non-rural codes. At the central level, the bank has conducted an opportunity mapping of all 12,000 non-rural PIN codes. It has also empowered the team to make real-time decisions. The bank has 14 state heads, and around 250 zonal heads. Both its headquarters and the state heads rely on a centralised data template to make informed decisions. Ultimately, the goal is to bring the bank closer to the customers, wherever they may be. “That’s what shapes our strategy,” says Batra.

In fact, the “micro-markets” insights have helped it identify optimal locations to open new branches and realign its ATMs and distribution network based on customer needs and market opportunities. For instance, it has added 25 branches in Pune over the past five years, resulting in a total of 121 branches now. The granular profiling of markets has helped the bank deliver value to customers in every segment. Currently, the bank has a CASA (current account and savings account) share of 40.8 per cent of the total deposits as on September 30, with an almost equal share of branches in metro, urban, semi-urban, and rural areas. (See box ‘Changing Loan Mix’.)

As part of its strategy, the bank offers comprehensive solutions to corporates and their ecosystem like channel partners, dealers, vendors, employees and other stakeholders, thus taking the full bank to the customer. Currently, corporate has a share of 22 per cent in the bank’s loan book. While the bank has ICICIStack for large corporate clients, it also has various ecosystems, including the defence ecosystem, start-up ecosystem, pharmaceutical ecosystem, IT ecosystem, education ecosystem, healthcare ecosystem, NRI ecosystem, and real estate ecosystem, where it takes a fully integrated approach. For instance, consider the bank’s recent launch of a comprehensive range of digital and physical solutions tailored to meet all the banking requirements of start-ups this March. This offering assists start-ups at various stages of their journey, offering treasury and transaction banking solutions, lending solutions, digital integration, management of FDI and regulatory compliance, and personal banking services for both employees and founders. It provides innovative solutions through its domestic and international networks, including its branch at international finance centre GIFT City, and IT services hubs in Gujarat. It has established a dedicated team for start-ups, serving them through an extensive branch network. Similarly, much like its micro-market strategy, there is a central team that comprehensively understands these ecosystems and empowers local teams to execute them with the necessary inputs.

Internal Collaboration

Bakhshi insists on internal collaboration, which basically means better coordination among teams on the ground and the head office or the product heads. The bank also has key external partnerships with Amazon, MakeMyTrip and Emirates to offer co-branded credit cards. Amazon Pay credit cards continued to see healthy traction, with over 4 million credit cards issued till September 2023.

Brokerage firm Emkay, in its report, has said that it takes comfort from the strong leadership back-up at the bank. “We are hopeful that the bank remains adaptive to limit unwarranted attrition and business dislocation, as it aspires to build up into a ‘sustainable and profitable bank’ in the long run,” it states.

Shreyansh Shah, Research Analyst at stockbroking platform StoxBox, says that ICICI Bank’s focus on rural lending, “with the opportunity of cross-selling the products through a vast network of branches, ATMs, and cash recycling machines” will help it to continue reporting solid profits going forward.

Over the past few years, the bank has shifted gears and become a retail-focussed institution. Like other banks, the high growth in unsecured books is contributing to growth in retail banking. Currently, the share of unsecured loans is around 13 per cent in the overall book. “There is a demand for unsecured loans. We are ready to extend loans if we can evaluate the creditworthiness of the borrower and ensure there is no excessive leverage,” explains Batra. In fact, he adds, that the “return of capital” is more important than the return on capital. “If you lose Rs 100 to earn Rs 3 (representing a 3 per cent net return that banks receive, with Rs 100 as the principal), that’s not a wise decision,” he says with a chuckle.

That’s the mantra Bakhshi is drilling into his 140,000-strong workforce: the importance of building a sustainable business strategy and an organisation that can stand the test of time. 

@anandadhikari

The full BT500 List can be accessed here