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March 1, 1999


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ICICI chief K V Kamath on the survival gameWe actually thrive on paranoia:

K V Kamath, 50, the technology savvy ICICI chief, is the shining new star of the financial sector. His prescience, his understanding and anticipation of the future is talked of in hushed whispers as he drives a well-oiled ICICI into the fiercely competitive Internet era almost like a finely-tuned josh machine. Excerpts from an interview with Pritish Nandy. Email this story to a friend.

You were one of the first movers in IT-enabling your organization. How has this helped ICICI? How did you, in the first place, anticipate the changing universe?

The story actually starts 10 to 15 years ago. We, at that point of time, realized that development banking as it was then understood had a limited life span. The environment required for development banking was slowly being done away with. For example, you needed a protected market, you needed subsidized money available to you so that you could take risks in line with venture capital. We saw all this vanishing and, therefore, quickly adapted ourselves. We became an organization that was prepared for the free market economy.

How did you do that?

We created a venture capital company. We went in for investment banking. We actually talked about creating a mutual fund. We initiated action on setting up a rating company. All the things required for a free market. Of course, the free market did not happen till 1991. Once it did happen, various changes took place. Interest rates were freed. Subsidised borrowings were removed. Our clients started operating in a market economy. What we saw in 1986 started becoming a reality from 1991 onwards.

Did this give you an edge vis a vis the competition?

ICICI had the framework to quickly capitalize on the changes and, I would say, reorient itself for the new market. It had also started doing one thing from 1986: Hiring the best talent in the country. From good business schools, good engineering institutes. Anywhere we could find them. By 1996, we had all the ingredients to make a dramatic change, the main ingredient being good people. We had a fair degree of financial muscle. We had also created the institutions required for the new economy.

So at that point of time we decided that we must start looking at ourselves as a universal bank. That was the way to go, we felt.

But the enabling technology to go universal had not yet come in so dramatically?

You are right. It had not come in to the extent it has today. But things were changing. The Reserve Bank had removed the barriers between long-term lenders and short-term lenders. We were prepared for this. We were ready since 1986.

Did you not have people within the organisation saying that it was unnecessary to invest in what was so far, far away?

Not too many, because the core professionals were all youngsters. The average age of the organisation even then was about 32.

What is it today?

Probably 30.

What about the government? They were your promoters.

Interestingly, the Government in 1986 would have had about 60 per cent control over ICICI but, by 1991, it had come down to 51. By 1997, when we had the GDR issue, it was down to 30 per cent. In other words, all this coincided with a decline in the government's stake. But I must say that in the case of ICICI, where the government never held a direct stake -- it was held by investment institutions and banks -- there was never a constraint in terms of compensation. That was the single major differentiator allowing ICICI to access the finest talent in the country.

Why did ICICI get this special treatment?

It was not specially done for ICICI. ICICI actually started life as a private company. Later, its shareholders got nationalized. We never got nationalized. The practices in ICICI, therefore, never got changed and we never really had a government-dominated board. That freedom, that operational flexibility meant a lot for ICICI. There were no constraints on our recruitment practices.

What about technology? How did ICICI become so technology-savvy?

We were early movers on technology. By 1988 we had all our MIS on computers. But the real technology stuff started in 1997 when operational barriers were dropped between various financial players in the market and we started looking at ourselves as a universal bank. We had the right people in place. We had the right institutional background. The building blocks were in place. The only missing link was the technology to bring it all together.

Technology was already changing the way global banking was being done. We realised that if we did not take cognisance of this we might be marginalised. This became a matter of paranoia for us.

So you decided to set up entry barriers through strategic use of technology?

Absolutely, Mr Nandy. We decided to move in first in every space in the IT domain.

If you look at our last three-and-a-half years, our first one-and-a-half years went in seeing ourselves as a universal bank. The competition did not give this credence and that was our first advantage. Now of course everyone talks of being a universal bank. But by now we have become a financial services company driven by technology. How does technology actually drive your company?

The focus is on three things. One: Core processes. We let them ride on technology platforms. Then come businesses. We want to ride them on technology platforms. Then comes the third -- frontier areas, e-commerce and all that. Each one runs its own different paradigm.

Riding the core processes on technology platforms should have been done a long time back. Everyone in the world was doing it. But the current areas, using e-com technologies, including access to ATMs, access to call centers and then B2B applications, B2C applications are slowly coming in. They are no longer frontier technology. We are getting into them slowly but surely and making them a normal part of our business.

What is the frontier technology you are looking at, in today's context?

Frontier technology for us is the most exciting area and also, in a sense, the most frightening. These are the dot com areas. Web trading, which has already caught on in the West. The idea of various portals doing various businesses. The more frightening questions are: Who will be the banks of the future? Who will be the financial services providers? Are the banks going to rule? Or will the telecom companies rule? Or the media companies? Or the portals? We really have no answers to these questions as yet. Will an AOL or an MSL or a Yahoo become a financial services provider? Will a telecom major with all the consolidation that is taking place become a financial services provider?

Whoever has access to the customers, I guess...

You are right. Access to customers is the key for the future. It can even be someone like Sony, who says, 'I have the ability to create the devices with which you will do business in the future'.

I think you can write off the last option. How can a hardware supplier get into a position of eminence or control in a software-dominated world?

Well, Sony says that it wants to get into banking. I really don't know. Normally I would have agree with you, but at the rate at which the world is changing, who knows who will re-engineer himself into a position of power and control? Maybe they want to reposition and revalue themselves. But in the process it will change everything. That is why we are so paranoid. In fact, we actually thrive on paranoia. It helps to keep us changing, anticipating the future.

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