DRIVING CHANGE IN FINANCE & BANKING

With an experience of over 20+ years in areas of banking, wealth management, sales and distribution of financial services products, Dhiraj Relli, Managing Director and CEO, HDFC Securities Ltd., is a member of the HDFC family since 2008. Prior to this, he has worked with other well-known financial services organisations. He is also a Chartered Accountant and done an advanced management programme from the prestigious Indian Institute of Management-Bangalore. He currently heads HDFC Securities, which is one of the stockbroking companies in India established in the year 2000. In an exclusive interview with Corporate Citizen, he talks about his career journey, the Indian banking sector, how it’s harnessing the digital growth, what’s the future of banking in India moving forward and more

"I was very clear from the beginning, I was not someone who was very good at engineering, nothing would attract me more—I was more of an outward person, I love to meet people, I love to interact with people and I was good at numbers"

Corporate Citizen: Tell us about your education and how did you choose to get into the banking sector as a career option?

Dhiraj Relli: I did my Bachelor of Commerce Honours (BCom. Hons) from the Delhi University and after that, I did my Chartered Accountancy, which is my formal professional qualification. Later on in 2013, I had done my advanced management programme from IIM-Bangalore. I wanted to have the flavour of the academic world (even now) and thought that this would be an opportunity for me to learn something different. I have been doing finance, I have been doing banking and financial services for long, so when I was posted at Bengaluru, to head the south region for HDFC Bank, that’s where I got this opportunity to do the management programme at IIM-B. I paid the fees by myself and the bank was kind enough to give me the required leave to do this course. In fact the thirty- odd participants who were there with me, they were all from different fields. Bengaluru being an IT hub, participants were mostly from the IT field. So, to that extent, I got a different perspective, different flavour of different industries as well.

When I was doing my schooling, there were limited options available. Either you become an engineer, doctor or take commerce or do something in the financial services space. I was always more fascinated with investment banking and corporate world, so I opted for pursuing my career in commerce. At that time, chartered accountancy was one of the best courses to get the hang of what is happening in the financial space—that’s when I did my BCom Hons from Delhi University, followed by Chartered Accountancy. I was very clear from the beginning, I was not someone who was very good at engineering, nothing would attract me more—I was more of an outward person, I love to meet people, I love to interact with people and I was good at numbers.

CC: Initially, did you face any challenges getting into the financial world and how did you overcome them?

When I did my Chartered Accountancy course, people perceived that Chartered Accountancy is largely to be about finance and accounting only. Whereas, I was always fascinated with the investment banking space, so I, in fact, took a turn from there and moved on more towards the marketing of financial services, rather than being a pure finance person. So, I have not pursued my career in accounting and finance at all. I wanted to have a strong foundation in finance so that I can understand the nuances very well.

CC: When you started your career, Public Sector Banks (PSB) were the major type of banks in India. Why did you prefer joining a private sector bank?

I was always someone who wanted to fly high and look at the opportunities and take appropriate risks also. I never wanted to pursue something, which is risk-averse, so public sectors banks and government jobs were perceived as more risk-averse opportunities at that time, whereas the corporate world was more risker opportunity, but having said that it was more rewarding also. As I said, I was always fascinated with the large offices, large environment and that’s why I did my Chartered Accountancy and that’s why went into the private sector space.

CC: For those who are looking forward to join the financial sector, what is advice as to where are more opportunities, in the public or private sector banking sphere?

Now the public sector banks also have come a long way—they were earlier more cooperate banks and now they are offering the entire range of financial services, right from the retails and they do offer equally good and challenging opportunities but may not be equally rewarding. The pay structure will still be based on the government pay structures, whereas in the private sector, the remuneration is not a constraint for the right candidates. Actually, the opportunities today in the financial services space is unlimited because the payment business is going through a revolution, cards business is going through a revolution. Demonetisation has forced India to go for an accelerated digitisation. We were on the path of digitisation but demonetisation fastpaced it even more.

CC: Over the years since you started your career there have been big changes in the Indian banking sector. Was, you doing the IIM programme, a step was taken towards updating your skills with the changes?

I think that was more to understand and it was my personal aspiration to understand how different industries function, that’s why I did that course and not from the point of view of honing my skills in the financial services space. That’s something I was already good at and already pursuing. I wanted to know more about how other industries operate—I was fascinated with lots of my acquaintances in the IT world and manufacturing space. So, I thought let me pursue a course, that gives me a platform to interact with them in a more formal environment and get more perspectives on that. In any case, it was related to business also because we do corporate banking and we do have corporate banking relationships with them. So, knowing your customers better will always give you a better understanding of your business.

"There are a lot of microfinance companies, that are going into the length and breadth of the country and catering to the unserviced citizens of India"

CC: What big changes have you seen over the years in the banking sector and what big changes are we going to see in the near future?

In the retail banking space, it was all throughout a branch led model. Now it’s moved on to having a brick-and-mortar structure-is not a big requirement, though it is a requirement it is not a constraint. So, one can really look forward to leapfrog through the digital channels.

CC: It is said that the Indian banking sector has to support the world’s fastest growing large economy of India, but many say that it is grappling with big challenges.

The banking sector is the bedrock on which the economy will grow, it’s not the otherwise. It is very important that the banking and financial services’ architecture is completely in place and is functioning to its potential to enable growth in India. So, keeping that in mind only, I believe that there is an emergence of private sector banks, non-banking financial services companies, payment banks, differentiated licences like small finance bank. So, we are seeing that there are different entities emerging in the financial services space, and it’s not just core vanilla traditional banks that are servicing the customers. In fact, there are a lot of microfinance companies, that are going into the length and breadth of the country and catering to the unserviced citizens of India.

CC: The banking sector is divided into public, private, foreign and regional banks and as of now, the public sector banks are still playing a big role. Are we going to see a big change with the private sector taking over a bigger role in the near future?

It actually took a lot of time for the private sector banks to get a meaningful market share. Still, 70 per cent of the market share is with the nationalised banks, 30 per cent of the market share is with the private sector and foreign banks, reginal banks are very insignificant. Foreign banks have only over seven per cent of the market share and the private sector have only about 23 per cent of the market share. In terms of the market share, the regional banks are very insignificant. They may be servicing a lot of unserviced population but in terms of deposits or lending proportion, they are insignificant players. I think the way we are heading, the private sector banks are likely to gain market share in the next 5-10 years and the public sector banks will continue to lose their market share—there are many reasons. They are grappling with their NPA related issues, there are issues on capitalisation and they have their own challenges in terms of hiring and retaining talent as well. The burden of distressed loans is bigger on public sector banks. It is there in the corporate lending private sector as well, but largely it is with the public sector banks, that’s why recapitalisation is happening in the public sector banks to the extent of 2.1 trillion rupees.

CC: With the government starting the Jan Dhan Yojna and bringing it into the banking sector, do you think the regional banks are going to play a bigger role, at least in the rural areas and is it a big opportunity?

It is an opportunity but again, their deposits and their values are very limited. They may be large in numbers, but their values are insignificant. Yes, it is an opportunity, but it will take many years to unleash that opportunity. Right now, the opportunities are more in the already established markets, which are metros, urban and semi-urban areas.

"Banks should leverage technology more. They should be nimble and they should be able to do the alliances with a lot of fintechs"

CC: How ready is the Indian banking sector to harness digital growth for scaling up?

Digitisation is the part and parcel of banking and banking sector is one of the early movers into digitisation. Whether it is in the form of an ATM, net-banking or offering various products to various digital channels. Now with new players like Paytm etc. they are offering payment services, the government is also taking a lot of initiatives such as UPI, BHIM and such applications, to ensure that we use more digital platforms for payments. The penetration of credit cards and debit cards has increased significantly. Usage is still taking some more time but I think both the private and public sector banks have leveraged the opportunity very well and they are making a significant efforts to leverage this opportunity further.

CC: Looking at the emergence of the digital business model for banking—what future will we be looking at as far as banking is concerned?

As of now, for the next 5-10 years, you would see that brick-and-mortar and digital banking will coexist, but since there are many merits on automation, there are many merits of digital channels. You can cover every nook and corner of the country, you can serve a large number of customers at a lower cost. Obviously, these points are favourable to the growth of the digital channels.

CC: Are the banks today leveraging data for consumer insights in a big way?

All banks are investing disproportionately higher resources in analytics. They are trying to leverage the information available through the social media, through their own experiences with their customers and trying to analyse the same and use the same for the credit as well as relationships.

CC: If we have to move the banking sector forward, we have to remove the traditional roadblocks like legacy. What can you say about it?

My suggestion is that banks should leverage technology more. They should be nimble and they should be able to do the alliances with a lot of fintechs. They should make the experience very simple, very easy for their customers and then only they will be able to serve a large set of customers. It should be very inclusive and not be confined to a class—they should be able to cover the large population of India, that’s where I think multilingual, ease of operations will come very handy, because there are a lot of people who will be comfortable in their own vernacular languages.

CC: Using an Aadhar Card to authenticate customers, many have a doubt that customer’s personal information is being accessed without their consent.

I think with the consent of the customer, there is no problem in that because in any case even if you do not access the information through an Aadhar Card, if you end up filling up the physical form, you are still collecting the information from the customer and that information is available once it is collected by the banks. So, whether it is retrieved through an Aadhar Card or it is collected through a physical form, the information, in any case, is there with the bank. So, to that extent, I see there is no threat. Knowing only the Aadhar number will not help anyone in doing anything—what is not compromised is your information and your biometrics, which is something very important.

CC: What are the positive implications of having Unique Identification Number (UID), to the customers and to the banking and the financial sector?

The positive is that you can serve the customers better, it gives speed, it gives you a paperless option to execute, and it saves the time. It saves the cost for banks, which can be passed on to the customers as well. You can serve a larger number of customers. Financial inclusion becomes more viable for banks to pursue rather than a government- driven agenda only. For the last so many decades, the financial inclusion was an objective of the RBI but what happened to that and why it was not going forward? Why the government had to push it through the Jan Dhan Yojna? Because there was no viability to the financial inclusion. How can you put a branch in a small village of 200-300 population and make it viable. To that extent, you need superior methods to serve the larger sections of the society, particularly the weaker sections of the society.

CC: How do the new policies favour financial inclusion?

They are definitely favouring. First of all, we have to understand and accept a very big change, which is the power of data in the hands of the end user. With Reliance Jio and other telecom companies, the data is now accessible to the masses. We have 300 million-plus smartphone users already, so people are accessing content through their smartphones and they can be used to service the financial services products also. They can take loans, do banking, do their transactions- they can do everything through their smartphones. It is bridging the infrastructure gap that we have currently. So, to that extent, it is becoming a very big boom and that’s what everyone is trying to leverage.

"I think the payment business is going through a very big revolution, you will see many multiple options of payment coming"

CC: Has demonetisation helped the banking sector? It has led to the surge of saving and current accounts.

It has helped the banking sector in many ways. One, there was a spurt of funds, which was lying idle with the customers and they were forced to deposit that in the banks. Money is the raw material for the bank—you get cheaper raw material and you can do more with that. So that’s what lead to the transmission of interest rates also. Despite that, RBI reduced the interest rates to the extent of 150 basis points at that time, banks were not able to reduce the lending rates. Whereas, the moment they got a lot of money because of the demonetisation, in the form of saving bank and deposits later on, they were able to lend it at a lower rate. So, to that extent it was beneficial to the banks and in fact burrowers also. It led to a big thrust and a big push towards digitisation, which was, in any case, going on as an initiative by the banks, but the government gave a big impetus to that.

So, a lot of money came into the saving bank accounts. It did not remain in saving bank accounts largely because it has a very limited interest, hardly four per cent and some bank giving slightly more. So, they were looking for an option to move this money were they can earn more. The money got moved to the deposits and also to the mutual funds. If you see the financialisation of savings, how it has happened in the calendar year post the demonetisation, it’s unprecedented. The kind of inflows through SIPs or lump sum investments in mutual funds, has helped the capital market to grow also. Earlier, investors or customers were investing largely into physical assets or holding on cash but since that money got into the banking system, that got invested into the financial instruments, including the deposits. The move from bank to fixed deposit, some part of it and some part of it moved to mutual funds. Now, mutual funds when they get money, they also become lenders. So, they have also lent into the corporate bonds, debentures and so on. To that extent what we see is that there is a decline in the credit growth by the banking sector but if we club it with the lending in the form of debentures and bonds by mutual funds, then there is good growth.

Q: What promising developments will we see in the banking sector in the near future?

I think the payment business is going through a very big revolution, you will see many multiple options of payment coming. Earlier, it was only cheque and cards and now wallets and many more options will come. It will become very easy to transfer payments from one account to another account, one person to another person; that is something already happening and it’s there we will see more and more innovation. That would enable e-commerce business, a cashless economy, and banks having more funds to lend also.

Q: What about foreign entrants, is ease of doing business making them easier to enter the Indian market?

They still have a very limited market share in India. They were at 5-6 per cent ten years ago, they are still at 5-7 per cent now also. Unless and until they bring in a lot of capital and invest a lot in India, they have to do a lot of catching up.

CC: Talking about the opportunity for those aspiring to start their career in the financial sector, how big is the opportunity?

The traditional jobs are at stake, but there are many more new avenues coming up. The business of banking and financial services would always remain as a relationship-driven business. So to that extent, if you have the requisite knowledge and skills to engage with the customers, there are end number of opportunities for the students because there is still a large population which is still underpenetrated. So, they may have a basic saving account but what about other services? They are still not availing loans from the formal banking sector. They are still struggling to get various products because there are probably very few income taxpayers in India, just about four crores.

CC: What about gender diversity and equal opportunity for women in the banking sector compared to other sectors?

The banking sector was one sector, which was always considered to be better and safe for women. And we have about thirty per cent of women workforce and it has been increasing. We welcome more and more women candidates and in fact, experience with women branch managers and relationship managers has been phenomenal. They do better jobs than the men, definitely. They are very good at relationship management, they are warm, very courteous and they are very disciplined also. I think there are a lot of opportunities for women in the financial services space. They are good at finances also.

CC: How do you prioritise the demands of your busy banking career and the demands of your life to bring in a healthy equilibrium?

Work-life balance has never been a problem for me. Of course, in the initial years of my career, I used to slog a lot, I have worked almost 14-16 hours a day also because that’s the choice I made at that time. Now, I don’t need to put in those many hours but I remain fully engaged. I think if you love something and you are passionate about something, it’s not a problem. I believe in one concept called full engagement. When I am at work, I am fully engaged with work and when I am with family I am fully engaged with the family. So, even if you get two hours and you spend quality time with your wife, daughter and parents, I think that’s good enough. What they expect is your full engagement with them, it’s not that you are on the phone, your laptop, then you are not doing justice. Physically you may be at home but if you are mentally not there, then it doesn’t serve the purpose.