Indian bank-tunaround

Started in 1907 Aug 15th Nationalized in 1969 Wholly owned by GOI Approximately 1450 branches 50 % of the business from south Used to be in top ten PSBs till 1994

Indian bank-tunaround
Started declaring losses from 1994 Reasons? Systemic? Regualtions?

-Basel I Income recognition and capital adequacy norms Year 2000 negative CAR of 13 % and Gross NPAs of 43 % Considered one of the weakest PSBs

Indian bank-tunaround
Recommended for narrow banking by Narasimhan committee Inspie of receiving recapitalisation of Rs 2400 Crs continued to incur losses Govt committee 4 members-Deepak parekh,(chairman HDFC),SD Kulkarniformer MD CEO L&T,Ram K Gupta,MD state bank of patialaDilip Choksi(Charterted accountant Mumbai) Report in 1999 Mrs Ranjanakumar appointed as chairman in 2000

 What do you think will be the right course of action? What factors other than detailed earlier could have contributed to the sickness? Whether turn around will be possible? What steps are required to improve the financialposition of the bank?

Indian bank-tunaround
Growth before restructure Growth during restructure Improvement %

Total Income Interest

5660 4998

8269 6926 1343 7310 959

2609 1938 672 1302 1308

46.10 38.85 100.15 21.67

Non interst 671 inc Expenditur 6008 e Operating profit -349

Indian bank-tunaround
Growth before restructure Growth during restructure Improvement %

Deposits Savings bank Non food credit

4814 1411 588

8362 2641 2728

3548 1230 2140

73.70 87.17 363.95

investme nts

3382

6174 1291

2792 1128

82.55 692.02

Reduction 163 in NPA

CRAR

-11.64

-13.60 -1.25 0.25 2.24 92.35

1.70 0.13 1.14 2.20 70.27

10.85 0.65 1.93 2.95 56.13

12.24 0.96 2.49 3.16 49.97

Return on -2.14 assets Ope profit 0.11 Net int margin Cost income ratio 1.87 96.36

Ratio of 75.32 staff cost to income Coverage -11.90 ratio

73.68

54.51

42.82

35.35

-8.91

-2.14

1.69

3.20

Indian bank-tunaround
Ist time in the history of PSB's an MOU was signed by the bank with GOI and an MOI was signed by employees with the Bank

Indian bank-tunaround
MOU signed 119 branches merged 4 tier structure was replaced with 3 tier structure.12 Zonal offices were closed 30 circles were created VRS 3200 employees were given Specialized branches for credit were created25 crs and above Training in credit risk management

Indian bank-tunaround
Started retail lending Advt sanction of credit in 48 hours Competitive int rates in home loans 818000 accounts sanctioned.Rs 4100 crores Mass campaign on holidays and sundays. MBA students were taken on summer internship Monthly meeting of executives Audit committees Cost of deposits came down from 8.7 % 5.9 %

Indian bank-tunaround
For taking decisions correct and timely information is vital NPAs were brought down from 2578 crores in 20001-02 to 1630 crs by one time settlements

Indian bank-tunaround
Present position Bank 100 % CBS compliant Basle II compliant Brand equity in No2 position after SBI as per latest ET brand equity Listed 2007 with Rs 95 premium quoted at Rs 200 presently

 Is the performance is solely due to management performance ? What are the external factors that helped the turnaround?

Present position as on 31.12.2012

Deposits : Rs 118970 crs Advances :Rs 88044 Crs Total Business : Rs 207014 Crs Operating Profit : Rs 867.37 crs CD Ratio : 74 Net profit: : Rs 1402 ROA : 20.77 Gross NPA : 1.21 % Net NPA : 0.69 % NIM : 3.58 CAR : 11.84 %

Awards
CNBC TV18 Award for 2011 Best public sector bank in mid size category. Golden peacock award for Innovative products and services 2012 No3 in best Services brand in banking by ET Brand equity survey Best Risk master By FICCI and IBA conference for 2011 Dun & brad street award for Best asset quality