At one end of the spectrum, IndusInd Bank is downsizing its business and even planning to opt for narrow banking as a part of its new strategy of moving away from the volume-driven approach. At the other end stands ICICI Banking Corporation, which is aggressively pushing its credit growth by cannibalising other banks' customer base.

IndusInd Bank has already reduced its deposit base by Rs 250 crore and advances by Rs 473 crore in the first eight months of the current fiscal. It wants to continue with the twin-objective of downsizing the deposit base and reducing the cost of deposits to push upthe spread on advances.

ICICI Bank, on the other hand, is snatching customers from others by offering a prime lending rate of 13.5 per cent, the lowest among the private and foreign banks. ICICI Banking Corporation has pushed its credit portfolio from Rs 1,150 crore in March to Rs 1,600 crore in November, registering a credit growth of over 45 per cent.

Taking into account the bank's investment in commercial papers (CPs) and other instruments, ICICI Bank's fund flow to the corporate sector has registered a 100 per cent increase in the current fiscal. "This is the only way of expanding business. We can afford this as our cost of deposits is lower than the competition. While expanding the credit portfolio, we are not compromising on the quality of assets. We entertain only double-A (AA) and triple-A (AAA) rated companies," said one senior ICICI official.

IndusInd Bank, in contrast, is busy slashing business and increasing the net spread on a lower volume of credit. The bank is prepared to play the gameof narrow banking if the situation dema-nds. "A long-dated government paper now offers a yield of 12.47 per cent. If we can bring down the cost of deposits to 10 per cent, we will invest in gilts and make money. There is no harm in becoming a narrow bank," an IndusInd executive said. This marks a paradigm shift from the bank's original strategy of going in for wholesale deposits and financing big corporates. It has slashed its exposure limit to any corporate group by over 300 per cent -- from 70 crore to Rs 20 crore.The main objective is to bring down the net non-performing assets (NPA) level which is bound to pierce the 5 per cent mark in fiscal 1999. Last year, IndusInd's net NPA was pegged at 3.96 per cent.

"We may not be able to raise the bank's profit but profitability will certainly get a big boost as cost of deposits go down despite the slashing of the advance portfolio," the IndusInd executive said. The bank's cost of deposits which was pegged at 15 per cent last fiscal has already come down to 11per cent. The objective is to bring it down further to 10 per cent by next year. This is being done by paring its high cost certificate of deposits (CDs) drastically. CDs, which accounted for 38 per cent of the total deposits base, has now come down to 20 per cent. "It will come down further as the focus is now on the retail segment. We will take retail deposits and finance mid-corporates instead of backing mega advances by corporate deposits," the executive said.

HDFC Bank also plans to grow through the retail route. It is prepared to grow its credit base by extending funds to top-rung companies. Though the bank's credit growth has not been as spectacular as its peers, the bank boasts of a nearly zero non-performing assets base. Compare this with the 6 per cent NPAs of UTI Bank, spurred largely by its reckless lending.HDFC Bank, along with ICICI Bank, has got into car financing in a big way. "Poor demand for credit from corporates can always be set off by the high margins retail finance business," feels anHDFC Bank official. IndusInd Bank, which for four long years operated as a wholesale bank, has entered housing finance and loans against dematerialised shares. The bank has also just launched retail financing for trade.

IndusInd's deposits grew by 38 per cent (from Rs 3,000 crore to Rs 3,800 crore) and advances by 27 per cent (from Rs 1,900 crore to Rs 2,450 crore) last year. It has downsized business drastically in the first eight months of the current fiscal. "By the end of the year, we want the advances to grow to Rs 2,600 crore while deposits may still stay at the level of Rs 4,000 crore showing a negative growth. However, the profitability will improve," the IndusInd source said.

The collective war for these new banks, however, is to break the dominance of the state-run banking industry and snatch a share of the business pie. Over the last few years, public sector banks have lost close to 5 per cent of their share in the banking business.