Preliminary report to come in three months.
Public sector lender Bank of India (BoI) has brought in global strategic consultancy firm McKinsey to advise on organisational restructuring and charting a road map for business growth in the next five years.
A senior bank official said the preliminary report would come in three months.
Seven consultants, including Ernst &Young, Boston Consulting Group and McKinsey, had expressed interest in the job. Elaborating on the need for external advice and appointment of McKinsey, a senior BOI official said: “The business scenario has become competitive. We have to frame business plans on (our) strength and improve on risk management and recovery.”
| REPORT CARD Performance in year ended March (Rs crore) | ||||
| Mar ‘07 | Mar ‘08 | Mar ‘09 | Mar ‘10 | |
| Total income | 10,499.24 | 14,472.15 | 19,399.22 | 20,494.62 |
| Net profit | 1,123.17 | 2,009.40 | 3,007.35 | 1,741.07 |
| Gross NPA | 2,100.49 | 1,930.92 | 2,470.88 | 4,882.65 |
| Gross NPA % | 2.42 | 1.68 | 1.71 | 2.85 |
| Source :- Capitaline Compiled by BS Research Bureau | ||||
While the bank has wide access to information due to its core banking platform and other programmes, “there is need for intelligent exploitation of data and information about consumer behaviour”, said a senior official.
Mumbai-based BoI is the fourth public sector bank to engage McKinsey for consultancy. State Bank of India had done so for revamping its corporate and wholesale banking business. At present, MsKinsey is helping the country’s largest lender in reworking the processes for rural banking.
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Following its recommendations, the corporate banking business in SBI was revamped to set up corporate accounts to look after large companies. It also formed another unit, a mid-corporate group, to focus on mid-size entities. This sharper focus helped to assess emerging funding and non-fund-based needs for companies and the offering of services, including treasury solutions.
Last year, Bank of Baroda had commissioned McKinsey for its business process re-engineering (BPR) advisory services. IDBI Bank had asked it for help in remap of branches, re-engineering processes and refocusing business.
BOI has aimed to grow its business to about Rs 12,00,000 crore in the next five to six years from about Rs 4,01,000 crore at the end of March. It plans to implement BPR initiatives to streamline its growing business.
The bank saw a change of chairman and managing director in the early part of 2009-10. Alok Misra, career BOI officer, took the reins in the second quarter of FY10. After three years of breakneck growth, it hit a rough patch in 2009-10, with a sharp rise in non-performing assets. Its gross bad loans more than doubled to Rs 4,882.6 crore at the end of March, from Rs 2,470.9 crore a year earlier.
BOI officials attribute much of this increase in bad loans to the adverse effect of the global financial crisis on corporate borrowers. Higher provisioning for non-performing assets made a big dent in its net profit. It reported a 42.1 per cent drop in net profit for FY10, at Rs 1,741, from Rs 3,007.3 crore for 2008-09.