CSB Bank eyes new highs as CEO CVR Rajendran retires on health grounds

With CSB Bank announcing the retirement, on health grounds, of its turnaround man, CVR Rajendran, from the post of managing director and chief executive officer, the century-old lender from Kerala is set to go for the next round of change.

Pralay Mondal, president of the bank’s retail, SME (small and medium enterprises), operations, and IT segments, is likely to take over the baton from Rajendran, even though a search process is on.

Those close to the operations of the bank indicate it was Rajendran’s efforts that transformed it from an old private sector bank to a new-generation one since he took charge on December 9, 2016. These included efforts like roping in investors, rejigging the lending portfolio, and improving operational efficiency.

“We must introduce innovative products and digitisation should be taken to the next level. We have to think about blockchain or artificial intelligence or this kind of things, which will make the bank a next-generation bank. That is the need for a new leader,” Rajendran told Business Standard when asked about the Thrissur-based bank’s future.

“The most challenging part of my tenure was getting out of the name (it was earlier called Catholic Syrian Bank), which appertained to a community, getting investors, listing, and expanding by opening 150 branches across the country,” Rajendran added.

An example of the change Rajendran brought in was its increased interests in segments like gold and micro, small, and medium enterprises (SMEs), thereby competing with non-banking financial companies (NBFCs).

The share of gold loans in its loan portfolio increased from 24 per cent in 2016-17 to around 40 per cent in 2020-21.

However, it was going slow on auctions in some regions after resistance from the public, which, according to experts, may lead to the company slowing the gold portfolio.

According to an India Ratings report on the bank, its operating costs are also likely to increase modestly as the bank opens 200 branches in FY22 and enters new segments.

The new branch openings are confined to Tamil Nadu, Andhra Pradesh, and Telangana, and expansion in the north and western is put on hold until the existing branches break even, it said in an analyst call.

A recent HDFC Securities report highlighted this geographical concentration, the stress in the corporate and SME segments, and volatility in gold prices among the major challenges the bank will face in the long run.

Transformation in five years

When Rajendran took charge, the bank was reeling from legacy issues. It was coming out of a long, legal matter regarding the acquisition of a 38 per cent stake (1993-94) by Thailand-based Sura Chansrichawla from the secondary market. Non-performing assets were on a large scale because the bank had lent significantly to companies during 2010-12. In FY15, the bank had to abort its initial public offering due to a lack of investor interest.

With the bank needing an immediate infusion of capital, the plan to rope in Canadian billionaire Prem Watsa’s Fairfax was on track when Rajendran took charge. However, due to a wide difference in valuation between a Fairfax-appointed entity (Rs 90-95) and a leading merchant banker (Rs 160), the deal was called off.

“Later CSB tried a qualified institutional placement to raise Rs 400 crore at an agreed price of Rs 140. Before the final round, the prospective investors formed a cartel and tried to bring down the price. All of them wanted a board seat and had their own strategy to run the bank. As Rajendran thought it will be disastrous for the bank to proceed, he went back to Fairfax and convinced them about the discovered price of Rs 140,” said a company source.

According to media reports, he brought down the share of staff cost from around 33 per cent of income during H1FY19 to around 19 per cent during H1FY22. The average age of the workforce was reduced from around 50 to below 40 through measures like voluntary retirement, performance-based job cuts, and reducing the retirement age to 58 years, which led to salary savings of Rs 1 crore per month.