There was no reason why the Union finance ministry should have messed up succession planning at the country’s premier bank, State Bank of India (SBI). If the idea was to allow the incumbent managing director, R Sridharan, a limited tenure in the top job, as a consolation since he missed out being considered for the job given the existing rules on age and eligibility, it is understandable. No harm done if you allow a senior person a brief term, before the regular appointment is made. In the past, even the Reserve Bank of India (RBI) had such interim governors. However, if the reason for the present situation was lack of proper paper work by those responsible for the selection process, then it reflects poorly on the Union government and the Union finance ministry. Also, it is unfair to whoever finally gets the top job at the country’s biggest bank. It is axiomatic that the successor to an outgoing top executive of any important organisation should be identified at least six months in advance. Not doing this lays the system open to the allegation that there is a conscious desire to build scope for extended lobbying and influence peddling.
As and when a chairman with a reasonable tenure takes over, he will have his hands full, and a handicap to boot. The previous chairman had defied the RBI by not fully meeting the provisioning norms laid down. Doing so now will immediately depress the bottomline, thus putting it in an unfavourable light compared to the earlier period. This will reinforce an unfortunate pattern in the reporting of public sector banks’ bottomlines. As the time for one chief to go approaches, performance starts smelling of roses and there is a sharp decline immediately after the new chief takes over, inviting the notion that he has inherited a poor legacy.
Another challenge the next chairman will face is to improve the quality of assets. It is far from what it should be, with SBI trailing its peer group. There was, in fact, no improvement in this regard during the long tenure of the previous incumbent. The asset quality appears to have been sacrificed on the altar of high growth and improvement in market share, important as they are. Therefore, a period of consolidation instead of chasing growth for the sake of growth may be in order. The outgoing chairman, O P Bhatt, had displayed remarkable aggression vis-à-vis the competition and this can-do attitude had enthused the organisation and enabled him to lead from the front. The challenge for the new leader will be to continue to enthuse without some of the earlier bravado, particularly picking a fight with the regulator. But though motivation is needed, there must be something to motivate. It is highly doubtful if the likes of Mr Bhatt are being recruited now at the entry level. Four decades ago, not only were the bank’s entry level salaries among the best in the country, including the private sector, the number of decent private sector jobs obtained on merit was far fewer. The bank has developed a serious talent deficit and the government has to do something to allow it to win appropriate talent across levels.
SBI is a national organisation so it must get the best in the national interest. Better leadership planning is a necessary part of building organisational morale, which is critical to attracting good talent in any organisation.