Axis Bank's Chief Executive Discusses Future Challenges and Opportunities

Axis Bank may have improved its handling of bad loans and reoriented its business strategy, but there is still much work to be done to increase its market share and become dominant in various segments, says chief executive Amitabh Chaudhry. He told ET that the Reserve Bank of India (RBI) is likely to tighten regulations due to the risks from technology and weak lending practices. Here are some edited excerpts from his interview.

Chaudhry believes that the current pause in interest rates will continue for some time. The RBI is aiming for an 8% GDP growth rate and wants to reduce inflation to 4%. Given this focus, Chaudhry does not expect any rate cuts this year. He explains that once rates start to be cut, it is difficult to raise them again, so the RBI will be cautious.

Chaudhry does not see signs of bubbles in Axis Bank’s portfolio but emphasizes the need for caution, especially with digital loans. These loans can quickly become problematic if payments are delayed. During the COVID-19 pandemic, retail loans were tested, and the importance of customer data became clear. Chaudhry notes that poor lending practices will result in high default rates within six months.

Chaudhry acknowledges that an economic slowdown would significantly impact consumers. However, he believes that the risk is low given the current economic growth projections. Some customers might be overextending themselves by using loans for personal consumption or risky investments, but banks can quickly correct poor lending practices.

Despite recent stock price gains, Chaudhry aims to build a sustainable and credible franchise. While Axis Bank is not yet as large as SBI or some other banks, it is growing. Chaudhry identifies areas for improvement, such as better products and lower costs of deposits, to enhance competitiveness. He aspires for Axis Bank to be ranked first or second in more business segments rather than third or fourth.

Overall, Chaudhry’s insights highlight both the progress Axis Bank has made and the challenges it still faces on its path to greater market dominance.