ICICI Bank has often pushed the envelope. The merger with BoR is yet another aggressive step.
Sourav Majumdar Sourav Majumdar | 26 Jun, 2010
ICICI Bank has often pushed the envelope. The merger with BoR is yet another aggressive step.
The true test of an organisation lies in the manner in which it is able to adapt to changing situations, regardless of its size and the challenges before it. If this one parameter is applied to the largest private sector bank in the country – ICICI – Bank chances are few would disagree that the bank has fared well in this test.
Last month, the bank, India
s second largest, declared it would merge Bank of Rajasthan (BoR), the controversial old generation private sector bank, with itself. The move was the first major corporate action that ICICI s new Managing Director and CEO Chanda Kochhar handpicked by her illustrious predecessor Kundapur Vaman Kamath for the top job – announced after she took over the reins of the banking behemoth on 1 May 2009. And in many ways, this step was signature ICICI Bank – deft, aggressive and one that would surely have raised some eyebrows in the financial circuit.BoR is an old generation private bank that has had several run-ins with the Reserve Bank of India, ones where regulators have always kept a close watch. In fact, even as I write this, there
s news of high drama at the BoR EGM on the merger, with the courts coming into the picture and employee unions protesting the move to merge the bank.But then, ICICI Bank is no stranger to controversy or regulators. Its previous MD and CEO Kamath, widely recognised as one of the finest financial sector minds this country has known, has often been ahead of the curve. From the time Kamath brought in cutting-edge technology at the institution, redefining financial services delivery mechanisms, to the mammoth reverse merger of ICICI
s erstwhile subsidiary ICICI Bank with itself, which then created the institution as we know it today, Brand ICICI has always been seen as some sort of a trendsetter.In the process, the bank has often fallen foul of analysts who have criticised the scorching pace at which it has grown. Many have also balked at the unabashed manner in which it spread the credit card culture in the country – with agents literally standing at airport gates dishing out cards to passengers. Sometimes, regula¥tors have also frowned on proposals that were too futuristic. I remember the time when the bank came up with a holding company structure for itself. This had the RBI going back to the drawing board and coming out with a discussion paper on the subject.
Mergers aren
t new to it either. From the one with the Bank of Madura to the reverse merger with the then ICICI Bank to the amalgamation with Sangli Bank, ICICI has always been balancing organic and inorganic growth options to carry forward its plans. Over the past year, Kochhar has clearly gone about the task of consolidating the balance sheet of the bank. Now, with the BoR merger, in one stroke, the bank will see a 23 per cent increase in the number of branches and a stronger network in north India.Over 60 per cent of BoR
s 463 branches are in Rajasthan and roughly 70 per cent are in north India. Analysts point out that BoR s biggest competitors in Rajasthan are SBI s subsidiary, State Bank of Bikaner and Jaipur (about 750 branches), Bank of Baroda (around 350 branches) and Punjab National Bank (about 310 branches). Kochhar herself has said the merger would give ICICI Bank a straight three-year heads up as far as additional branches and level of deposits are concerned. It would have taken the bank three long years to build those additional branches to the desired level if it were to start from scratch.At a time when being nimble-footed is a sure recipe for success in the financial sector, this strategy will come in handy for the bank. And its gameplan of concentrating on current and savings account (Casa) growth fits in perfectly with this move.
The real challenge, however, will be in integrating the vastly different BoR culture with the ICICI Bank one. But having spent years in the ICICI Bank set-up observing Kamath closely, Kochhar will know that. Her task is cut out for her. And there
These are the author
s personal views. He can be reached at majumdar.sourav@gmail.com.
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