ICICI Bank’s Silent Alchemist

WHAT HAPPENS IF an employee fails to recognise the CEO of his company? It would be an awkward situation to say the least. But it did not matter to Sandeep Bakhshi, who made an unannounced visit to ICICI Bank’s branch in Lonavala. Bakhshi — who has shunned publicity right through his career and more so after taking over the top job — sat in one corner of the branch, watching the proceedings for a good half hour. Employees at the branch went about their work, assuming the 62-year-old to be one of its several customers. After a while he went up to the manager’s cabin and introduced himself. But the manager failed to recognise who he was, till the CEO made the revelation. Even as the manager was all flustered and tried his best to make amends for the faux pas, the unassuming Bakhshi broke the ice with his pal talk. But more than meeting protocols, he got down to talking about what the branch — which was a laggard — could do to improve its business targets. The tone and demeanour of the conversation had an alchemy effect as the branch went on to break all its past records.

There are enough and more of these anecdotes about the mechanical engineer who has reinvigorated the country’s second-largest private sector bank by breaking down hierarchies and simplifying processes after taking on the top job since October 2018. The takeaway from industry sources and insiders is that Bakhshi is following the KIS — keep it simple — model. There is no management mumbo-jumbo or reinventing of the wheel, instead Bakhshi has adopted a commonsensical approach — banking is a service proposition and is not product-led. Effectively, the message down the rank is that no products will be pushed down the throat of customers. Narrating an instance, an insider tells Fortune India, that when the communications department was being “nudged” by the products team to create a buzz around a particular product, an opinion was sought from Bakhshi. The CEO had just one question: “Ask the guy would he sell the product to his brother. If the answer is yes, go ahead. If not, then you have your answer.” In management parlance, this approach would be defined as customer centricity, keeping the customer at the centre, and offering a product that is relevant rather than the other way round. Bakhshi’s philosophy is that a customer is never in love with his bank, and he needs the bank only for fulfilling a temporary mismatch of cash flows, or to keep his money safe.

This clarity of thought has also been accompanied by transformative cultural and structural reforms with an all-pervasive “boss” culture being done away with for a one bank, one team culture. “Leadership matters but it matters even more when it is about the change or being the catalyst, as it requires bold thinking, and willingness to steer cultural change,” Vikas Khemani, founder of Carnelian Asset Advisors, which has an exposure to the bank as part of its portfolio, tells Fortune India.

The bank, whose origins lay within the architecture of the erstwhile development finance institution, had largely functioned as a bank with different growth engines, more importantly, wholesale and retail. Bakhshi dismantled the special project finance group. “By scaling down the division, he sent out a very strong message to the organisation about his strategy and intention,” mentions Khemani, also an ex-ICICI group employee. The one bank, one team approach also led to the doing away of a differential incentive system with a fixed bonus percentage across levels. In fact, that he is cut from a different cloth is evident when Bakhshi became the only banker to have voluntarily relinquished his fixed compensation of basic and supplementary allowances during the pandemic-stricken FY21.

His message to external stakeholders is clear and keeps getting played over like a record. “We continue to be guided by the twin principles of ‘One Bank, One RoE’, emphasising the goal of maximising our share of target market across all products and services and ‘Fair to Customer, Fair to Bank’, emphasising the need to deliver fair value to customers while creating value for shareholders,” is a routine comment heard in every quarterly analyst call.

While Bakhshi lets his team do all the talking, numbers show the difference he has made. Business per employee has risen from ₹0.58 crore in FY18 to ₹16.69 crore in FY22; PAT per employee is up from ₹0.08 crore to ₹0.22 crore per employee over the same period. But the big difference is in the return ratios with the ROE up from 3.34% in FY19 to 14.97% in FY22. That is also a reflection of the quality of growth under Bakhshi, wherein non-performing assets (NPA) fell from 4.77% in FY18 to 2.08% in FY19, down to 0.76% in FY22.

At the recent earnings call, Bakhshi told analysts that the bank aims to grow its core operating profit within the guardrails of compliance and risk. “The focus is on growing the loan portfolio in a granular manner with risk and reward, with return of capital and containment of provisions, below a defined percentage of core operating profit, being a key imperative,” mentioned Bakhshi.

Instead of lording over branch managers and cluster heads from the ramparts of the headquarters at Bandra-Kurla Complex in Mumbai, the decentralised approach is giving employees at the front-end the liberty to decide what is relevant for the customer. “We are no longer chasing targets but the lifecycle value of a customer,” says a senior bank executive. The back-to-basics approach has ensured that the loan book is pretty diversified with a calibrated approach to retail and wholesale banking.

The changing contour has prompted the stock market to rerate the bank with the market cap nearly doubling from ₹2.57 lakh crore as of March 2019 to ₹5.07 lakh crore as of end of March 2022, while the share price surged from ₹399 to ₹730 over the same period.

The reclusive CEO, who still drives around in a Toyota Innova, was first brought into the bank in 2009 as deputy managing director to fight rising delinquencies, and later was given the task of heading ICICI Prudential Life Insurance Company. In both stints he earned his spurs. Banking, however, can be a very fickle business wherein cycles change and so do outcomes. But as long as the bank sticks to the basics, Bakhshi will be more than happy living in oblivion.