Rise of a phoenix

The book titled A Beginning: The turnaround story of Indian Bank published by Tata Mcgraw-Hill contains the contours of this success story. The readability of this book is enhanced because of the flavour of authenticity about facts and events witnessed, and hammered, by the author Ranjana Kumar, who was the architect of the success story as the bank's chairman and managing director at the time.

Kumar has the distinction of being the first woman officer to become chairman and managing director of a public sector bank.

While the book contains detailed aspects of the restructuring plan and actions, covering all significant points like containing of non-performing assets, developing new banking products, image building and human resource management, particularly with a psychometric approach, it also has chapters containing the author's own views about the art and science of restructuring; there are excerpts of her interviews on the subject on various occasions. Letters of the directors on the board of the bank are also appended, providing a ringside view of the entire process.

Indian Bank, headquartered in Chennai, is public sector bank with an all-India network of branches. Indian Bank was established by a few prominent local people. It started business on August 15, 1907, soon after the launch of the famous Swadeshi Movement in 1906. This fact, and the failure of Arbuthnot Bank, established earlier by Arbuthnot & Co, an Agency House from Scotland, gave the bank a swadeshi impetus and sense of national pride. Indian Bank, over the years, had built a committed client base and by the 1980, started publicising itself with the slogan "Nine decades of trust".

In the wake of the introduction of prudential norms by the Reserve Bank of India in 1992, while most public sector banks showed a decline in profitability, Indian Bank showed, for the first time in decades, a loss of Rs 390 crore. By 1995-96, it reported an unprecedented loss of Rs 1,336 crore, that wiped out its net worth completely. Obviously, this could not be attributed only to the introduction of prudential norms. It exposed a deep-seated erosion of systems and procedures and, indeed, the values on which this bank had been nurtured over the years.

According to author, the most important reason for the downfall was "adventurism" in credit decisions taken on the basis of contacts and sentiments without a detailed appraisal or professional examination.

The author has very candidly mentioned the point, (that has been generally commented on), that capital infusion by the government of India was the key to the bank's revival.

A table shows that among all public sector banks, Indian Bank got the maximum capital contribution, amounting to Rs 2,675 crore between 1992-93 and 1998-99. Thereafter, it also received Rs 1,300 crore and Rs 770 crore in 2002 and 2003 respectively. It is, however, stated that without concomitant reforms, this large infusion of funds would have been in vain.

In this context, it would be interesting to note how the position of negative networth, particularly the requirement of achieving the adequate capital to Risk Weighted Asset Ratio (CRAR) for the continuance of the bank's Singapore branch, was used by the bank to get substantial capital from the government.

Management of bad loans or non-performing advances (NPAs) by the bank during this period highlights its bold initiatives. The theme has been: "If an account has to be written off, do it, why keep lingering there". Again, a table illustrates the a substantial reduction made in NPAs due to write-offs and settlements with debtors.

All in all, in the words of the former president of India, Dr APJ Abdul Kalam, who has written the foreword, the managerial and leadership experience presented in this book would be eminently suitable for all practising bankers and management institutions.

The author is former chairman and managing director of United Bank of India

A NEW BEGINNING:
THE TURNAROUND STORY OF INDIAN BANK

Ranjana Kumar
Tata McGraw Hill
Price: Rs 675; Pages: 328