Trouble-shooter takes guard

Meleveetil Damodaran takes over from G N Bajpai as the Sebi chairman

Last year, immediately after the finance ministry gave its nod to the proposed Rs 9,000 crore Stressed Asset Stabilisation Fund (SASF) to clean up the books of the Industrial Development Bank of India (IDBI), a senior banker asked a North Block bureaucrat why a similar facility had not been created for ICICI Bank and other financial intermediaries that have been suffering from the same malaise (read: non performing assets)?

Why was IDBI given preferential treatment? Said the bureaucrat: "No other institution asked for it."

This possibly explains why M Damodaran, the bureaucrat-turned-fund manager-turned-banker, has been so successful "" he has the uncanny ability to discover new solutions to old problems.

Indeed, Damodaran is deft at seeing things in a different light. In July last year after announcing the proposal to merge IDBI Bank with IDBI in Hyderabad, Damodaran had a meeting with a group of industrialists. Inevitably, the discussions veered around to IDBI's high non-performing assets (NPAs).

Far from being apologetic about the baggage of sticky assets, Damodaran retorted that the NPAs actually reflected the weakness of certain segments of industry and IDBI merely mirrored the reality "" it was not something the institution itself was responsible for.

Damodaran, 57, is not a nuts-and-bolts man. Nor does he care to micro manage banks, funds and the markets. But he has the vision to succeed and an ability to extract the best from his team. Above all, he has had solid government backing for whatever he does.

His ability to tackle challenges was evident even a decade back when as chief secretary of Tripura Damodaran handled one of the most sensitive state elections. Insurgency was at its peak in the state then but Damodaran saw through the bloody elections "" which had been postponed twice "" with ,lan.

He moved to confront a much bigger challenge in the form of Unit Trust of India (the number of unit holders in US-64 was double Tripura's population) in July 2001. UTI was facing a crisis on two fronts "" liquidity and solvency.

While the government addressed the solvency issue, banks were roped in for liquidity support.

He brought back UTI from the brink, ensured that no dust was swept under the carpet, cleaned the cobwebs of maladministration, cut flab by offering a voluntary retirement scheme to employees, motivated staff to perform and introduced market-related salaries.

A similar approach was followed at IDBI. He started overseeing IDBI as its chairman along with UTI in October 2003. In December last year, he quit UTI to concentrate fully on IDBI alone.

First, he extracted Rs 9,000 crore from the government in the form of the SASF. NPAs were spun off from IDBI's balance sheet into the special purpose vehicle. Then he pushed the merger of IDBI Bank with IDBI, adding flesh to the balance sheet and making it strong to take on competition.

IDBI insiders will surely miss Damodaran. They feel that he has just started his job in the organisation. However, executives at the Securities and Exchange Board of India (Sebi), whose chairman he has become, see in him a leader who can deliver.

Prithvi Haldea, head of Prime Database, the Delhi-based outfit which tracks the primary market, says as a capital market regulator Sebi should be feared and respected but that has not been case over the last one decade.

"It's a hot seat. There are issues of corporate governance, insider trading. Damodaran will do well with his positive approach and impeccable integrity.

His stint at UTI has given him exposure to the markets and he can use that wisdom here," Haldea points out. He also says that capital markets are extremely dynamic and the real challenge is to be proactive, instead of being reactive.

Sebi insiders feel that Damodaran can take up the challenge. Sebi's two great weaknesses are meeting legal requirements and investigations. The main reasons for the Securities Appellate Tribunal having overruled key Sebi orders are Sebi's weak investigations and weaker legal preparedness.

Damodaran has mastered the art of investigation in UTI and is a law graduate from Delhi University. He'd perhaps also do well to listen to Sebi's first chairman G. V. Ramakrishna who told Business Standard that Sebi need real-time surveillance and that a report on the previous day's trades should be on the chairman's desk every morning.

Still, Damodaran has his share of critics too. His confidence often verges on arrogance, his detractors say. He is also intolerant of criticism, they add.

Some bankers think that he's an empire builder and accuse him of having had ambitions of gobbling up UTI Bank and having been responsible for UTI Bank chairman PJ Nayak's resignation. But he bulldozes all allegations with sheer dynamism and superlative performance.

As an admirer puts it, love him or loathe him, you can't ignore him.