“WHY DO YOUNG MINDS ATROPHY?” It was 1996 and K.V. Kamath had just returned from Indonesia to take charge of the Industrial Credit and Investment Corporation of India (ICICI), where he had worked bet­ween 1971 and 1988. The poser came from Nachiket Mor, a fast rising, younger colleague from the treasury section. Mor had asked a young executive to send letters out to a few clients. “The way Nachiket put it, it was a simple mail-merge exercise,” says 63-year-old Kamath. Two days later, the job was still not done. So Mor turned to Kamath for an answer. But, ICICI’s all-powerful managing director and CEO had none.

While this anecdote is now part of ICICI lore, what Kamath did next—and how that would forever change ICICI—isn’t very well known.

He began seeking answers from “everybody who came to me, who I thought had any understanding of this subject”. His moment of epiphany was triggered by Harvard Business School professor Ramchandran Jaikumar, an expert on manufacturing processes. He was in Mumbai then, working on an ICICI-sponsored project on India’s export competitiveness. Jaikumar, who died in 1998, had asked Kamath: “Are you a meritocracy?”

“Of course we are,” came the reply.

“I’m not talking about merit; I am talking about meritocracy,” Jaikumar countered.

Kamath was lost, and requested a simple explanation of the distinction. Jaikumar asked about the scale on which ICICI employees were measured, and how many bagged high grades. Kamath responded (“very proudly”) that 90% to 95% of the employees were rated between four and five on a five-point scale.

“That is your problem,” replied Jaikumar.

A decade and a half later, Kamath, now non-executive chairman of ICICI Bank (as it was renamed in 2002), admits how much of a revelation that was. If there was one moment which transformed ICICI from being a repository of talent to a finishing school for bankers, that was it.

Lying on the table in front of him is a list of 30-odd ex-ICICI managers, who now head a legion of finance outfits such as banks, brokerages, insurance firms. It includes Kalpana Morparia, CEO, J.P. Morgan India; Kishor Chaukar, MD, Tata Industries; Vedika Bhandarkar, MD and vice chairman, Credit Suisse Securities India; Shikha Sharma, MD and CEO, Axis Bank; V. Vaidyanathan, vice chairman, Future Capital Holdings, and more (see list).

They control large swathes of India’s finance industry. And compete with each other as well as ICICI, often using familiar ploys. Ask Amitabh Chaturvedi, head of Dhanlaxmi Bank (ICICI stint: 1998-2003), whether his rapid nationwide ATM ramp-up (380 in 18 months) is similar to what he did for ICICI eight years ago while heading retail liabilities and channels, and he smiles.

FROM LEFT: Kalpana Morparia, CEO, J.P. Morgan India, Ajay Srinivasan, CEO, financial services, Aditya Birla group, Vedika Bhandarkar, MD and vice chairman, Credit Suisse Securities India, Amitabh Chaturvedi, CEO and MD, Dhanlaxmi Bank.
FROM LEFT: Kalpana Morparia, CEO, J.P. Morgan India, Ajay Srinivasan, CEO, financial services, Aditya Birla group, Vedika Bhandarkar, MD and vice chairman, Credit Suisse Securities India, Amitabh Chaturvedi, CEO and MD, Dhanlaxmi Bank.

ICICI’s incumbent CEO and MD, Chanda Kochhar, says going up against her ex-colleagues means she can sometimes second-guess them. “But it works both ways, so that gets neutralised.”

This tribe of ex-ICICI bankers isn’t universally adored. Many are viewed as arrogant, aggressive, and ruthless. Balaji Swaminathan, Standard Chartered Bank’s head of client relationships, India and South Asia, who is rumoured to take over as vice chairman, Bank of America Merrill Lynch India, says the objective at other banks is to achieve returns for the shareholders. “While ICICI’s policy is similar, it’s also to beat the competitor down the road,” says the man who was also ICICI’s chief financial officer (ICICI stint: 2001-2005).

Predictably, this lot is also acutely conscious of its lineage and makes the most of it. “When we approach ICICI’s executives, we’ve noticed they tend to choose their assignments carefully. They know they have a premium attached,” says Sonal Agrawal, CEO, Accord Group, a head-hunter, who has often scalped ICICI workers.

So there it is, a supremely networked and influential bunch of people who think they are stars, compete and help each other professionally, but never overstep boundaries. “I was just on the phone with Shikha asking her to meet someone I knew. But it is only a request. If the person doesn’t fit the bill, that’s fine. No offence taken,” says Chaukar (ICICI stint: 1984-1998).

  “A lot of people may not give Kamath credit, but they all are where they are because of him.”  
—Kalpana Morparia, CEO,J.P. Morgan India (ICICI stint: 1975-2007)  

Rarely in the history of India Inc. has one institution produced so many leaders. Sure, in the mid- to late ’90s, senior offices across the financial sector were occupied by the alumni of State Bank of India (SBI), Citibank, and ANZ Grindlays. But they weren’t as numerous as ICICI’s, or as widespread across distinct businesses.

The other commonly cited example is Hindustan Unilever, or Hindustan Lever as Unilever’s 52% subsidiary was known till 2007. By the late ’90s, its alumni headed around 197 companies in India, according to an article published in Businessworld, many of them post-liberalisation entrants. Hindustan Lever was then known as the school for CEOs.

But if ICICI now deserves a similar moniker—how about CEO Bank?—that’s where its similarity with Lever ends. The consumer products major, which began operations in India as a trading outfit in 1888, has a long tradition of attracting the best and the brightest. Even in the ’60s, its senior managers were routinely poached.

However, ICICI, which started life as a development finance institution (DFI) in 1955, was always a quasi-government body. From its long name, a bureaucratic mouthful, to its ownership (82% was state owned in the ’70s), to the finance ministry’s influence over its daily running, everything positioned it very differently from Lever. An ex-central banker says that although ICICI had luminary lea­ders like H.T. Parekh (founder, Housing Development Finance Corporation of India, and the man who introduced mortgage housing finance to Asia) in the ’70s and S.S. Nadkarni (an eminent development banker) briefly in the mid-’80s, it never attracted the kind of talent that Lever did. “For one, ICICI’s salaries and perks were unappealing,” he says. Also, banking was strictly controlled, governed by stringent state norms, which left little scope for innovation.

“My mandate as the head of Pru ICICI mutual fund was to make it the best private sector MF,from its 14th rank.Wanting to build leadership was a very clear focus.”   
—Ajay Srinivasan, CEO,financial services, Aditya Birla group (ICICI stints:1987-1991;1998-2000  

Sure, Kamath joined in 1971, Morparia in 1975, and so on, but they were exceptions. Till the ’80s, ICICI wasn’t the place where India’s brightest wanted to build careers.

FORTUNE INDIA TALKED WITH close to three dozen people for this story. Among ICICI’s executives and alumni, and those who have been closely associated with it, there’s no consensus on who set up the leadership machinery—Kamath or his predecessor,
Narayanan Vaghul, chairman between 1985 and 2009. The answer varies depending on the person’s tenure and, of course, loyalty. Leo Puri, MD of Warburg Pincus India, says what matters is that ICICI, a client when he was director at McKinsey & Co., was led over two decades by two stalwarts. “To have two such leaders, in rapid succession, is an unusual coincidence. You typically have a great leader followed by a series of pygmies.”

Vaghul, a sprightly 74 and the more senior of the pair, says leadership is contextual. His argument: ICICI’s constantly altering business model kept throwing up new opportunities, which, in turn, created a phalanx of great managers.

It wasn’t as simple as that. When he took over in the mid-’80s, ICICI was still playing DFI. It was funded through government bonds. Running it took little imagination as it deployed funds as part of a consortium with a fixed mandate (its consortium partners were term-finance peers Industrial Financial Corporation of India and Industrial Development Bank of India). “I came to office, and sat and did practically nothing,” says Vaghul.

“I learnt how to handle a run on the bank under Mr. Kamath.”  
—Amitabh Chaturvedi,CEO and MD, Dhanlaxmi Bank(ICICI stint: 1998-2003)  

“In 1985, I felt the government wouldn’t be able to continue to finance us. When they run into huge deficits, they’ll stop the bonds and we’ll be the first casualty.” He adds: “I think I called that one correctly.”

His predecessor, Nadkarni, had already started a leasing business. Vaghul wanted to expand that while exploring other opportunities. “That was the starting point of our need to assemble a whole lot of people who would provide quality management.”

If there was a bias towards recruiting experienced hands earlier, say, under G.L. Mehta (chairman, 1958 to 1972) and Parekh (chairman, 1972 to 1978), Vaghul went looking for fresh blood. “It was madness personified. Imagine, there were no vacancies, and I would ask my colleagues to grab the next brilliant person they come across,” he says.

In 1986, Kamath was sent to recruit from his alma mater, the Indian Institute of Management Ahmedabad (IIMA). It wasn’t easy. ICICI didn’t pay the best salaries, nor did it have prior experience in recruiting from B-schools. (The likes of Kamath weren’t recruited directly from campus.) His pitch: “Join and see the value of what you learn. Tomorrow, you will be worth significantly more than if you joined a company that paid you top dollar today.” Kamath says that was “the first time ICICI advocated a policy that you can grow with it and then grow beyond it”.

“There’ll always be a little bit of ICICI in me. The rigour with which I analyse a company or a credit situation,I learnt it from there.”  
  —Vedika Bhandarkar, MD and vice chairman, Credit Suisse Securities India (ICICI stint: 1989-1998)  

Ajay Srinivasan, CEO, financial services, Aditya Birla group (ICICI stints: 1987-1991; 1998-2000), who came aboard from IIMA in 1987 after hearing Kamath, built his career around that philosophy. “Sure, foreign banks were a big draw on campus. But for a guy just out of B-school, to work on project appraisals of diverse industries and meet different entrepreneurs was a big kick.”

Meanwhile, under Vaghul’s instructions, ICICI began sending appointment letters to the top 20 rankers in the chartered accountancy exams. “We didn’t even interview them. Sometimes two would join, sometimes 10, but it never mattered. We were getting interesting people to work for us,” says Vaghul.

WHILE ICICI did not set campuses on fire, those who worked there spoke highly of its work culture. S.H. Bhojani, partner at law firm Amarchand & Mangaldas & Suresh A. Shroff & Co., remembers his interview in May 1973. He had switched three jobs by then—at one he lasted barely five months; his longest tenure was 23 months. One of the interviewers, P.B. Medhora, then joint MD, asked him how long he’d stay at ICICI. Bhojani said that would depend on how the company contributed to his career. Medhora took it as an affront and snapped the file shut: the interview was over. Three weeks later, Bhojani was offered a job at ICICI. He later learned that Parekh, who didn’t say a word during the interview, had reasoned with Medhora. “Mr. Parekh told him, ‘The boy has put a challenge before us. It’s up to us to accept it or say sorry, we’re not up to it’,” says Bhojani. He would spend the next 28 years at ICICI, winding up as deputy MD.

Even in the control economy, this enlightened way of dealing with people had become part of ICICI’s culture. By the late ’80s, as Vaghul’s ideas started taking form, young, ambitious professionals began to take notice of ICICI. Though it remained partially state-owned—the government’s shareholding dropped significantly by the late ’80s—ICICI took the lead in reshaping the country’s financial services landscape. In 1986, along with the Unit Trust of India, it set up the Credit Rating and Information Services India Ltd (Crisil), India’s first credit rating agency. The same year, it promoted the Shipping Credit and Investment Company of India. Two years later, it set up Technology Development and Information Company of India, the country’s first venture capital outfit.

Vaghul was aware that he was creating something new. He formed a peer group of CEOs with whom he would regularly discuss ideas. The group included Ashok Ganguly, chairman, Hindustan Lever; Ratan Tata, then heir presumptive of the Tata group; Madhu Patwardhan, vice chairman and CEO, National Organic Chemical Industries, a Shell-Mafatlal joint venture; Keshub Mahindra, chairman, Mahindra & Mahindra; and Suresh Krishna, chairman, Sundram Fasteners. “We would meet regularly at the Chambers (at Mumbai’s Taj Mahal hotel), or some other place, exchange ideas, and discuss what needed to be done,” says Vaghul. It wasn’t just shop talk. They’d discuss the future of India, government policy, etc. These conversations allowed Vaghul to refine his thoughts on a lot of issues, including grooming a generation of ICICI employees. “There was only one way of doing this: empowerment,” he says.

Without exception, ICICI executives, past and present, admit this: One thing that stood out was ICICI’s willingness to trust its people with hefty amounts of responsibility, and to encourage them to take risks. For example, in 1987, Pradip Shah, barely 35, was sent from ICICI as Crisil’s first MD. Three years later, 34-year-old R. Ravimohan was dispatched to set up India’s first over-the-counter exchange, ano­ther ICICI initiative. “I always had a bias towards young people and felt compelled to empower them,” says Vaghul.

That continued into the Kamath years. Suvalaxmi Chakraborty, CEO of State Bank of Mauritius’ India operations (ICICI stint: 1989-2006) remembers how in 1996 the treasury department, where she was posted, needed to raise Rs 10,000 crore from the wholesale market through the private placement of bonds and deposits. This was way beyond anything it had ever raised. Some of India’s biggest merchant bankers were roped in. They promised to garner around Rs 4,000-6,000 crore, with an understanding that ICICI wouldn’t directly enter the wholesale capital markets for three to six months.

Chakraborty told Mor, then her boss, that the merchant bankers hadn’t committed to the entire amount, which meant she’d have to raise the remainder. She was barely two years into the treasury job. “He said to go right ahead, and never bothered me a single day to find out what I was doing. By the time I left treasury (four years later), we were raising around Rs 25,000 crore,” says Chakraborty. “We were never afraid.”

Ananda Mukerji (ICICI stints: 1989-2000; 2001-2004), non-executive vice chairman of Firstsource Solutions, a business process outsourcing firm, remembers a saying: “If you could survive the first thousand days at ICICI, your career would be made.” Mukerji was Kamath’s executive assistant from 1996 to 1998. He adds: “If Vaghul built the institution, Kamath gave it the edge.”

IN APRIL 1997, a few months after his conversation with Jaikumar, Kamath and nine of his seniormost colleagues locked themselves in the central conference room at ICICI’s then headquarters, 163 Backbay Reclamation, Mumbai, for two days. The objective: To identify the stars among ICICI’s 300 top managers. Kamath was personally driving the process. He pushed for a complete ranking of every individual, cutting across departments. The sessions were brutal. Some participants stormed out of the room; others openly wept.

“It was tough, though I wasn’t one of those who cried,” says Kochhar. “This was the first time we were ranking people across departments, relative to each other, so many of us got very territorial.”

It was crucial for Kamath to know, as clinically as possible, the worth of ICICI’s talent pool. After his eight years in South East Asia (six at the Asian Development Bank, Manila, and the rest with the Bakrie Group, the Indonesia-based conglomerate) Kamath’s big idea was to create a large consumer bank out of what was still broadly a term finance company. “I needed to know who could mould the institution.”

OVER THE NEXT DECADE, Kamath set a blistering pace. By 2009, when he stepped down, ICICI’s valuation had risen more than 10 times. Along the way, it listed on the New York Stock Exchange, bought three banks, pulled off a reverse merger, and emerged as India’s largest private bank and No. 2 in the country after SBI. Under him the bank grew about 20 times by assets and 21 times by revenues. While assets grew from Rs 24,481 crore in 1996 (for both ICICI and ICICI Bank) to Rs 4.83 lakh crore for the merged entity in 2009, revenues grew from Rs 3,118 crore to Rs 65,351 crore in the same period.

FROM LEFT: Kishor Chaukar, MD, Tata Industries, Suvalaxmi Chakraborty, CEO, State Bank of Mauritius’ India operations, Amit Tandon, MD, Fitch Ratings India.
FROM LEFT: Kishor Chaukar, MD, Tata Industries, Suvalaxmi Chakraborty, CEO, State Bank of Mauritius’ India operations, Amit Tandon, MD, Fitch Ratings India.

“My gut reaction is that if all those things had not happened, including the opportunities that were created in the group, we wouldn’t have seen such a wide list (referring to the alumni). I’d like to think that gave them the ability to dream and go beyond,” says Kamath. A majority of the names on the list worked in ICICI between 1996 and 2009.

Kamath’s ex-colleagues say he was a hard boss. “If he was promoting you, all he would say is, ‘Okay, you’ve done well here. Now you head this department’. And that was it—there would be no nice words of praise,” says J.P. Morgan’s Morparia (ICICI stint: 1975-2007). “If Vaghul was softer, more involved in you as a person, Kamath’s was probably a tougher love,” says Credit Suisse’s Bhandarkar (ICICI stint: 1989-1998).

In July 2003, in one of the most controversial actions of the time, Kamath pushed through a voluntary retirement scheme (VRS) which cut ICICI’s headcount by 1,496, roughly 13.6% of the workforce. Vaghul, as chairman, had opposed the move but finally allowed Kamath his say. (Kamath had reduced the headcount by 339 through two relatively smaller VRS schemes in February 1997 and December 1999.)

A year earlier, ICICI had already introduced a talent assessment programme, a 360-degree employee evaluation. Having begun identifying ICICI’s talent in 1997, Kamath was constantly looking for ways to improve the process further. Now, he was seeking ways to disproportionately reward high performers and also identify future leadership. The VRS and the talent assessment programme would set the tone for ICICI’s culture in the new millennium: an extreme bias towards results.

Not everybody was happy. “But, as I kept on saying, you can’t have a meritocracy without being result-oriented,” says Kamath.

“Kamath’s ability to spot talent is top class”.  
—Kishor Chaukar, MD, Tata Industries (ICICI stint:1984-1998)  

ICICI’s executive director and human resources head, K. Ramkumar, sees Kamath as an “outright capitalist who came to ICICI. He made no bones about it”. Kamath would say that performers deserved a larger share of the economic surplus created. And the non-performers, “who found it difficult to rub shoulders with the performers, were better off elsewhere. He was very clinical.”

Kamath looked for six traits in a leader: The ability to act in an independent manner; the ability to analyse data; the ability to execute; an entrepreneurial streak (“You could also call it lateral thought, but I would call it an entrepreneurial ability to go beyond the obvious.”); the ability to deal with ambiguity; and, finally, emotional equilibrium.

“The people on your list,” Kamath tells Fortune India, “would tick most, if not all six boxes.”

There was a seventh trait. Kamath doesn’t mention it, but those who worked with him do: speed. He hated long presentations, would urge colleagues to pack light to avoid waiting at airport conveyor belts, and was “forever in fast-forward mode” says Chaukar, who has known him since they joined IIMA in 1969. Sometime in the late ’90s, during the dotcom boom, he heard about Silicon Valley’s 90-day project turnaround norm. After that, says Warburg’s Puri, Kamath began to push his team to complete projects in 90 days. Or less.

Madhav Kalyan, MD, Bank CEO, JP Morgan Chase Bank, India (ICICI stint: 1995-2008), who led the team that listed ICICI Bank on the NYSE in 2000, remembers how Kamath pressed him to list in 75 days. It involved meeting U.S. accounting norms, appointing auditors, conducting road shows with investment bankers, and more. “A year earlier, ICICI had listed on the NYSE and he felt we should be able to pull it off quicker,” says Kalyan. If ICICI took 103 days to list against Kamath’s 90-day target, ICICI Bank took 74. Emerging market companies usually took around six months to list.

“We were hardwired to do stuff quickly,” says Devesh Kumar, head of Mumbai-based Fortune Fi­nancial Services. He was with ICICI Securities from 2000-2006, and was heading equities there when he quit.

  “We were never afraid.”  
  —Suvalaxmi Chakraborty, CEO, State Bank of Mauritius’ India operations (ICICI stint:1989-2006)  

Accord’s Agrawal argues that ICICI never bothered about age- or tenure-based promotions that constrained other financial companies. “It would pick young talent, give them opportunities, and rotate them.”

“We were trying to groom 30-yearolds to become general managers and join the board by their late thirties. So you didn’t have the luxury of testing people for a long period. In any case, today’s youngster is also looking for early breaks,” says Kamath.

If Vaghul used his peer group, Ka­math would often turn to ICICI’s board for advice. “We were his sounding board,” says Lever’s Ganguly, who was on ICICI’s board from 1997 to 2001. “Kamath knew people were his main asset, which he had to nurture.”

Last year, HDFC Bank’s country human resources head Man­deep Maitra declared that she did not want the ICICI culture “out here”. ICICI sent a legal notice to Maitra. (HDFC Bank did not respond to Fortune India’s request for more information.)

  “All of us think growth in terms of 10%, 20%,30%; Mr. Kamath thinks exponentially.”  
  —Amit Tandon, MD, Fitch Ratings India (ICICI stint:1984-2001)  

Maitra issued a clarification but many, including former employees, admit that ICICI creates a culture that emphasises the short term. This has two effects. One, employees tend to become generalists, as they keep changing projects. Two, the focus is on maximising the present. A senior finance manager who worked at ICICI Securities for over a decade claims Kamath didn’t care much about long-term relationships with clients: “His view was that in this business, if you offered the best rates, people would come to you. No one will pay you 0.5% more just because you had a great relationship with them. Vaghul believed in the long term.”

After being ICICI’s larger-than-life boss, Kamath often finds that comments or ideologies of others are ascribed to him. Nonetheless, these arguments are familiar to him. In his book, he says, leaders need to be well-rounded. “Otherwise you become too angular.” That’s why he mandated that high-performers be rotated across different assignments.

The criticism levelled against ICICI’s short-term focus may well have to do with how the bank changed course under Kamath, with the retail bank gaining prominence, says Amit Tandon, MD, Fitch Ratings India (ICICI stint: 1984-2001). “Unlike the term finance model, which runs on long-term relationships, a consumer bank is more here and now.”

Kamath, on his part, argues that in an environment where opportunities were still scarce and the organisation moved from project to project, his actions were often misunderstood.

NOW THAT BOTH Vaghul and Kamath aren’t actively involved, the big question is whether ICICI’s leadership machinery will stay intact. It’s a question uppermost on the minds of many, most of all Kochhar’s. Her succession wasn’t easy. Since it was announced in December 2008, four business heads have quit (Shikha Sharma, Renuka Ramnath, Sonjoy Chatterjee, and V. Vaidyanathan), and Mor is on his way out as co-chairman of the ICICI Foundation. At ICICI’s current headquarters in Mumbai’s Bandra-Kurla Complex, stories are swapped about the exits that happened gracefully, and those that didn’t. Kochhar, meanwhile, keeps getting compared with Kamath. “One of the challenges is that the first year of the new CEO gets compared to the 15th year of the previous head,” says Kochhar.

Vaghul, who commends her execution abilities (“She can do it to near-perfection”), says ICICI can still generate leaders, but it will be difficult. “It happened in the growth phase. It’s harder now. Chanda must be facing a very difficult task, given the environment. Also, she has inherited a very large organisation.” Kochhar says that the opportunities that create leaders will stay but its nature will change. “The next opportunities won’t come from new businesses, but from scaling up existing ones.”

Size hasn’t diminished ICICI’s hunger. If anything, it’s become systematised. For the past two years, ICICI’s seniormost managers gather in February at their training facility in Khandala, near Mumbai. The group is divided into five teams, each representing a top Indian bank—SBI, HDFC Bank, Punjab National Bank, Axis Bank, and ICICI. The teams are given real data for the past three years, such as balance sheets, macroeconomic indicators, and profit and loss accounts, and locked in a room for two days. “We then say, ‘now beat each other’,” says Ramkumar. The aim of the exercise, jointly conducted with McKinsey, is to identify the weaknesses and strengths of ICICI as well as the competition. “After the McKinsey team leaves, we start our planning.”

Some of ICICI’s alumni also say now that the bank is so big, a slightly less aggressive stance would serve it better. Ramkumar agrees and points to HR guru Wayne Brockbank’s similar assessment two years back. Since then, in an attempt to tone down its alpha male culture, the bank has added two more traits to its list when judging potential leaders: sensitivity and collaboration.

And has moved one step closer to eliminating the risk of atrophying.

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