In June this year when M B N Rao, Chairman & Managing Director of Canara Bank, retires after three years at the helm, he will be contented not only because the Bank has become financially stronger than before but also due the accomplishment of his much treasured dream to push Canara Bank in a new orbit of growth.

Rao will retire six months after launching a new “Re-positioning and Re-branding” exercise unveiled last week, for the gigantic 100-year old government-owned bank. An exercise that will make Canara Bank, Rao hopes, run like a Cheetah with the strength of an elephant.  

Rao spoke to Deccan Herald’s Dilip Maitra and Chanda P Kumar to explain how the Bank plans to shed off its traditional image and boost its business by becoming more modern and appealing to the gen-next. Excerpts of the interview.

Deccan Herald: Could you tell us about the re-branding exercise, and why was it necessary for Canara Bank?

M B N Rao: For some time now we have been benchmarking the bank with the best international practices in banking to make Canara Bank world-class.

For this purpose we have restructured the organisation with lesser layers in branches and administrative offices.

We have adopted technology on a massive scale for core banking solutions and other initiatives; introduced our own life insurance business and revamped mutual fund arm with large foreign collaboration. The idea is to make Canara Bank a super specialty financial institution against plane vanilla banking.

We are upgrading and updating the skill of our manpower through elaborate training, as there have been dynamic changes in the banking industry.

Canara Bank is also introducing new products and services, such as online trading, centralised processing of housing loan etc. For the corporate sector we have introduced a syndication group by strengthening the merchant banking department with advisory services, for SMEs. We have also launched a venture capital fund inducting five more banks to finance SMEs in the area of technology, biotechnology and other sunrise industries.

While all these were happening within the bank, we did not make any external change. So we wanted to tell all the stakeholders - borrowers, depositors, shareholders and employees - that we are different from what the perception is.

DH: Any particular customer group you are focusing in your re-branding exercise?

Rao: Though the exercise is meant for all, it is aimed at clearing the misconception in the younger generation. We find that there is a changing pattern in the customer segment, in tune with India’s demography where people below 25 constitute more than 54 per cent of the population.

Increasingly, more and more youngsters are becoming active banking customers thanks to new job opportunities and the floating student class. We saw the need to change according to what appeals to younger customers.

While we have the internal capabilities, delivery channels and products & services, the youth should also feel that ‘Yes, this bank meet all my requirements.’

DH: Didn’t the peer pressure also force you to change?

Rao: There is no doubt that everyone will have to keep an eye on what the competition is doing. In the last few years there have been rapid changes in the external environment and customer expectations. Number of private and foreign banks have entered into the retail and SME segment, which has been our strong hold.

Competition will further intensify from 2009 as a result of the of WTO agreement that will make it easier for the foreign banks to access Indian market.

On the other hand Canara Bank has reported good performance and awarded the best nationalised bank by Ernst & Young. While the Bank got many recognition and accolades, we need to fortify our image in the eyes of stakeholders that we are strong and good.

DH: When you embarked on this exercise, what was the customers’ perception of the bank?

Rao: We found that our existing customers are happy with our service, they think we are strong but traditional.

The perception of the younger people was more telling: they feel Canara Bank is too conventional and old-fashioned. It did not appeal to them as much as some new private banks and some foreign banks do.  

To initiate a image change we first decided to have a strong brand and brand communication. We engaged professional services of Ray + Kesavan WPP in 2005 for a detailed exercise to build a new brand personality.

DH: Could you tell us a little about the new logo and identity of Canara Bank.

Rao: The new logo for Canara Bank is based on the idea of a bond and is a representation of the close ties between the Bank and its many stakeholders - from customers and employees to investors, institutions and society at large.

The two seamlessly connected links capture the essence of this partnership. The rich blue represents stability, scale and depth, while bright yellow evokes optimism, warmth and energy. The new logo symbolises that banking is a partnership between the bank and the customer for mutual benefits.

When the consultants asked me which animal would I like Canara Bank to be compared with, I said I want it to be a cheetah which is the size of an elephant, massive and strong.

DH: What changes can the customers expect from this re-branding exercise?

Rao: The quality of service will definitely change. All staff members will be told to become more customer friendly and proactively help them with the Bank’s services. We will make customers aware of the bouquet of products and services we offer. A savings bank customer who keeps large balance in the account, for example, will be offered the life insurance and mutual fund options available within the bank. Soon online share trading will be launched by us.

For the SMEs, we should not only provide them with money but consultancy services also. We will advise them on marketing, having tie-up, foreign currency funding, forex risk hedging etc.

DH: If Canara Bank is doing so well why does its share under perform in the stock market?

Rao: We are performing exceedingly well but market did not understand and perceive the value of the bank. Yes we do keep a low profile and don’t make a lot of noise like many others.

We are among the largest public sector banks with strong captial adequacy, highest government ownership and lowest NPA. The long term benefits of all these should have reflected in the share price. But, unfortunately, people go by external perception.

Now along with good performance, re-branding of the Bank will attract attention of investors, I hope. We will become more proactive in investors’ relationship through analysts meets.

DH: Your profitability was under pressure in the last few quarters. Any action being taken?

Rao: With the intense competition in the last one year to mobilise more deposits, our interest cost did shoot-up and interest spread became thinner.

Now we have changed our strategy. We are shedding a substantial part of high-cost deposits and reducing low-yield advances to rebalance our portfolio in the asset and liability side. So while we reduce our volume, our profitability will improve. We are also expanding the baseline volume by reaching out to retail segment in a big way.

There is a big push in technology too. As against 330 branches now, nearly 1000 branches will come under core banking facility by March 2008. By March 2009 all 2600 branches will come under it.

In terms of our overseas expansion, we are present in London and Hong Kong, and also have approval to open in Shanghai before March 2008.

In addition to this we have got approval from RBI for five more branches like Germany, South Africa and three in Middle East. We have another 15 in the pipeline and in about three years time Canara bank should have about 24-25 overseas branches.