BS Banking Annual 2017: Need to empower PSBs, says Arundhati Bhattacharya

Former State Bank of India Chairman Arundhati Bhattacharya says the only way out for public-sector banks is to have a strong board

Former State Bank of India Chairman Arundhati Bhattacharya, who retired in October 2017, had her task cut out as bad loans, the merger of five associate banks with the parent bank and demonetisation took centre-stage. The only way out for public sector banks (PSBs) is to have a strong board, which can take decisions, she says. Edited excerpts from an interview with Abhijit Lele
 
Hectic activity in resolution of big corporate cases was expected in December. Why have things got postponed?

There are still many things that need to be done before you start resolution. For instance, the amendment to tax rules like minimum alternative tax (MAT) will have to be done through the Union Budget. 

 

Does the process get postponed to the next quarter?

That is right. I do not know whether they are processing bids. You will still need to wait for the amendments. I do not blame anybody, because it is very difficult to envisage requirements before actually getting down to it. While the
intentions are right, these are little bits and pieces that have to be addressed. But these delays will not be repetitive in nature.
 
How do you look back on your four years as chairman?

We worked on a number of things such as technology, human resources, risk management, etc in the four years. I had hoped to finish all these within two years, consolidate in the third year and then leave. But a lot of it went into the third and fourth years, and consolidation will probably happen now. So things are not as simple or quick as we think they are.

 
What key changes did you focus on?

We worked on a number of things through the entire period. In technology, the first project I took up was to enhance internet bandwidth across the network, because that was a big problem. There were a number of projects after that like digitisation, data security and adoption of cloud technology.

Similarly, in human resources, we revamped the evaluation system performance targets for everybody. We also started recruiting experienced people from the market in areas like data analytics, which has become an important unit, because if you do not have your modelling and analytics in place, or if you can’t evaluate risks on a real-time basis, you will not remain relevant.

 
Are you satisfied with the three major changes of last financial year — demonetisation, merger with associates and preparation for the insolvency regime?

I am quite satisfied with demonetisation and the merger. I think we did our best. Both were time-bound with clearly laid out plans on what was to be done. We had prepared well for the merger. We conducted 62 mock runs with the IT system to ensure they worked smoothly.

I had been hearing about these mergers since the time I joined the bank. Conducting the same business in six different establishments was inefficient. You lose control and can’t keep everybody up to speed, leading to repetition and wastage. 

The toughest job was resolution of non-performing assets (NPA) and I feel a little bad that I could not complete the job before leaving. We did resolve accounts to some extent but not sufficiently. That is a regret.

How do you look back at demonetisation now?

It gave no one any time to think. We had to take action on a daily basis and we did amazing work. If you look at risk and crisis management capabilities, we gave ample proof of it, because we were literally thinking on our feet. Even on the information technology front, we made so many changes. You also had to ensure people get to know the instructions — what to do and what not to do. It was not an easy job at all.

 
What issues were you concerned about at the time?

Taking currency from place to place is not an activity you can do just like that. You need to plan and also get law enforcement agencies involved and take insurance companies on board. Plus, there were local sensitivities which had to be taken into account before you made any movement (of currency stock). Movement within states is simple, but when you are moving across states, it becomes very difficult, because you have to take all the state governments into confidence. Strangely, I got the maximum number of accolades and appreciation letters during that period in the entire four years.

 
PSBs cannot continue to function as they have done so far. How do you see them evolving in the next five to 10 years?

Actually, that is why we need to empower PSBs. A number of things can be done. A good board should be put in place. The government has done quite a bit on this aspect, and the kind of people coming into PSB boards is experienced in planning and execution. Hence, they know challenges and difficulties. They should have the same kind of freedom that private sector boards have. The direction can be set by the board on how the bank is different, based on its strengths and problems. And specifically, on how they can play to their strengths would be a big step.

 
Do you foresee problems in mergers of PSBs?

This depends on which banks are merging and for what reasons. The problem is when there is a forced marriage, the players may not be happy about it. That is why the government has not forced the issue this time. If two banks come together by choice, believing that they would benefit, the kind of difficulties seen in the past may not occur.