The Syndicate Bank is in expansion mood. The bank has taken a new approach which is claimed to be a first of-its-kind strategy in the Indian banking industry. This is strengthening the connectivity of the top management and senior officials with the front line employees. Another drive of its special ventures is from within. The bank is going to sell its shares of ` 500 crore to its own employees in the last quarter of this FY, that is, in the coming January. It is expected that this venture will create financial stability and strength.
Mrityunjoy Mahapatra, MD, of the bank, spoke to BE’s Kishore Kumar Biswas.
Q. What is your assessment of the economic situation, particularly, from a banker’s point of view? Is the worst is really over?
A. One has to consider it from a different perspective. There will be new proposals of loans and their disbursements. Therefore even at the same level of NPA, the ratio will look better when it is represented as a percentage of bigger denominator, the total loan disbursements. But loan disbursements will be more pronounced with higher growth. But the Indian economy is not growing at the expected note. This is due to shortages of capital, lack of correction in the economy, etc.
Second is the resolution mechanism in the legal process.
It relates to S4A, Assets Quality Review, and the sudden
RBI’s February 2018 circular, regarding the presentation ofbanks’ balance sheetand the system is adjusting. Therefore I think in coming quarters, one can expect, the worst will be over. But not yet.
Q. More and more piling up of NPA has been happening. Is it due to new slippages or bankers had been hiding the real assets picture of the banks?
A. I do not think that bankers were hiding asset quality. This impression has come due to sudden changes of the RBI resolution mechanism. The way bankers would practise presenting balance sheets sharply differs when one has to follow the new RBI guidelines. Earlier restructure of loan was allowed, BIFR was allowed, people went for asset restructuring, interest servicing, 5/25, etc. But suddenly the guidelines changed and our balance sheets looked different.
Q. It is known that banks have started taking advice
from an outside source for their credit proposal assess-ment. It is expected that bankers are by nature more capable of assessing credit proposals. Then why do
bankers lose confidence?
A. Yes, you are right. Bankers are more capable of doing it. But may be in some cases for better assessment, some outside assessment may be required. We may have to depend on inputs from outside sources like credit rating agencies and merchant bankers. Cyclicaleconomic factors also create problems.
Q. A section of bankers thinks that many officers joining after 1985 are not very capable of analyzing credit proposals. Have the PSU banks really been suffering from inadequate human resources?
A. You are partially true. When we joined banks we had to do important documents manually. For example, we would work to tally the debit and the credit sides. It is true that some kinds of knowledge are accrued if things are done manually. But consider the increase of efficiency in the era of computerization. The business of SBI has grown by 20% while its employment increased by only 10%. At present, a bank employee has to deal with a huge burden. Therefore jobs with the help of computerization and mechanization are a must. So I think a balance is needed. It depends on the efficient management of the institutes to train their employees.
Q. Do you think that PCA is a panacea as the root causes are different for different banks?
A. You are true. The root cause of suffering of the banks is different from each other. So a particular medicine cannot solve all the problems.
Q. After the selling of shares to employees, what will be the bank’s ownership position?
A. The shares to employees of the Syndicate Bank will
be given from the government’s shareholding. We have about 35 thousand employees. At present, the government of India holds 73% and public holding is 27%. After that, the employees’ share will be 2.5%. Then share composition of the bank will be so, government 71%, public share 26.5% and employees’ 2.5%.
Q. How can the policy mergers be a help to PSU banks?
A. At present, three banks are going to be merged into one. But there are a lot of things that are to be considered for amalgamation. It is not an easy job. This was experienced from the last amalgamation of SBI and its associate banks and another bank. One has to consider merger of technology, merger of products, merger of job cultures and merger of bank branches. In my assessment, the government is also watching for the prospect of merger. If it is suitable, then more mergers will be made, otherwise not.
At the same time it is experienced throughout the world that even a small bank can do its business successfully, earn good profits and satisfy its customers with differentiated services. Therefore, size is not always a factor for running a bank successfully. But it should not be denied that big banks are also needed in an economy.
Q. What is the status of your bank?
A. There are banks in India with 2000 or so branches. But Syndicate Bank has more than 4000 branches with high concentration in Karnataka and UP. Another consideration is the volume of the balance sheet. Big banks are classified as volume of business with ` 5 lakh crore or more. Syndicate Bank is just about to reach that. So it is not a small bank.
Q. What is the NPA situation of your bank?
Our NPA is below 6% of the total loan disbursed. We have a three pronged strategy to address NPA management. First, it is to control fresh slippages of our assets. Second is to upgrade the NPA account and thirdly to recover the NPA. To control slippage we are to follow alternative methods, follow up mechanism of banks so that they can understand before a credit is going to be NPA. The SMA1 or SMA2 in assessing the pre NPA stage are to be strengthened and related employees should immediately intervene. Other officials will look into it, settle and check slippage. For up-gradation we have a target that by 2019 the NPA will be same as the March 2018 levels. That means slippages are already there but the NPA level is same. That means, up-gradation is being done.
For recovery we have engaged a large number of employees. For example, in housing loan we have engaged 1200 to 1400 employees who will concentrate on this job. They will identify accounts which can easily be solved. This year a huge amount is lying with agricultural sectors because of debt waivers policies announced by some state governments. But we have talked with Chief Secretaries of some states and some other high officials in other states about it. They have agreed to repay shortly. This will increase the recovery. We expect in a year we will be able to recover 15% to 20% of the total loan ` 36,000 crore. This will not increase the income but up gradation will increase. Additionally, we will get the money due through the NCLT. Our corporate loan is about 40%.