Challenging times ahead for Axis Bank's new MD and CEO Amitabh Chaudhry

The new CEO will need to review the bank's processes to keep the loan book healthy. He was MD & CEO at HDFC Life Insurance

Amitabh Chaudhry, 54, will have a challenging job when he takes over as managing director and chief executive officer of private lender Axis Bank in January next year.

In addition to challenges such as reining in non-performing assets (NPAs) and boosting profits, Chaudhry will have to repair the bank’s reputation, build internal controls, and improve regulatory relations. He will succeed Shikha Sharma, whose term ends in December.

Dwelling on priorities before Chaudhry, Ashvin Parekh, managing partner at Ashvin Parekh Advisory Services LLP, said building a quality loan book, forming an effective senior management team and having constructive relations with regulators should be top on his agenda.

Building quality loan book

While Axis Bank has been grappling with elevated NPAs, the asset quality of the bank showed improvement in the June quarter (see table). The bank expects another quarter of elevated NPA levels, after which it will be back to normal.

In the face of corporate led-loan book growth, Chaudhry will have to build a quality loan book by ensuring that NPA levels do not rise.

Organise senior management team

The Axis Bank ship is stabilising and now it needs a captain and competent crew. Chaudhry will have to build a solid senior management team. The induction of an outsider as the company’s chief executive officer often results in reshuffling at senior management levels, said a banker.

Sidharth Rath, head of corporate and transaction banking, has put in his papers.

Building relations with regulators

Axis Bank had a run-in with regulators — the Reserve Bank of India(RBI) and Securities and Exchange Board of India (Sebi) — lately. Improving relations with these regulators would be a key role for Chaudhry, especially with the rising 

regulatory supervision of private banks in the country.

Sharma had to shorten her tenure owing to the RBI raising questions over her re-appointment despite the rising bad loans and governance issues like inquiries into earning leaks over Whatsapp.

Strengthening internal controls and governance

The bank is facing a Sebi probe into the bank’s earnings leak on WhatsApp. It is also under the RBI 

scanner for high divergences in the bank’s recognition of bad loans compared to that of the RBI. All of these point at lax controls, say experts.

The new chief executive officer will need to review the bank’s systems and processes to keep the loan book healthy and grow the business.

Work to improve reputation

Regulatory probes, low profits, soaring NPA levels, the conduct of some executives after demonetisation, coupled with stretched uncertainty about the successor, have dented the bank’s reputation.

Chaudhry will have to work hard to improve the bank’s reputation and his induction as chief executive officer is expected to refurbish the bank’s brand image and change market perception.