BS Banking Annual 2017: Arundhati Bhattacharya, leading from the front

Arundhati Bhattacharya has shown what public sector banks are capable of when they get their act together

Five days before Arundhati Bhattacharya’s three-year tenure as chairman of State Bank of India (SBI) was to have ended on October 6, 2016, the government gave her a year’s extension. And this last year would be one of the most eventful years of her career. For one thing, she became the voice and face of the Indian banking sector, taking on the mantle of communicating how banks were putting currency notes in people’s wallets after the government banned old Rs 500 and Rs 1,000 notes in November 2016, the month following her extension. For another, she will be known in SBI’s annals as the chairman who merged five associate banks with the parent bank.  

 
When Bhattacharya took the helm at India’s largest lender in October 2013, the first task she addressed was the burgeoning non-performing asset (NPA) problem. She brought down gross NPAs from 5.6 per cent in September 2013 to 4.2 per cent two years later. But the Reserve Bank of India’s diktat to banks to clean up their books from the December 2015 quarter meant that NPAs shot up, and chasing errant borrowers became the main occupation of many a public sector banker. The NPA issue continued to plague Bhattacharya through her tenure, and she has said this was the only area she regrets leaving incomplete.

 
The third major test was the merger of five associate banks and Bharatiya Mahila Bank with itself from April 1, 2017. While SBI had merged one bank at a time in the past, a merger with six entities was fraught with challenges, which she executed very well. “We prepared well for the merger, with as many as 62 mock runs for IT systems to ensure that everything worked smoothly,” she says.
 

The merger has created a bank with a consolidated asset base of over Rs 33 trillion, providing SBI more firepower and scale to compete in the global arena. Consolidation also took it into the league of the top 50 banks globally in terms of assets. Bhattacharya put in a lot of groundwork prior to the merger, especially in 2016-17, in terms of cleaning up the corporate loan book of associates, integration of information technology systems, and bringing senior management on the same page to ensure a smooth transition.

 
The merger has also put some strain on the bank’s financials, with a rise in slippages in the retail loan book and slow growth in home loans. Gross NPAs rose from 6.9 per cent in the March 2017 quarter to 10 per cent in June, owing to the weak asset quality of the associate banks. But, these are teething problems, said an analyst with a domestic brokerage firm. The September 2017 quarter results showed slippages were under control and asset quality was on the mend.
 
Bhattacharya focused on making the banking giant more relevant to the changing business environment, customer needs and employee expectations. In human relations, which she had headed in the past, she brought about a system where every role was evaluated against a target. She made the bank a friendlier place to work in, especially for women, and allowed employees to work from home if they had to care for sick parents or if a child was in a crucial academic year.

 
The leader in physical banking was lagging behind private sector banks in the technology and digital space when Bhattacharya took over as chairman. The first thing she did there was increase bandwidth across the network, following it up with digitisation, data security and adoption of cloud technology. Meanwhile, the bank’s digital offerings for retail and corporate customers increased and improved, as it quickly launched products ranging from the wallet SBI Buddy to digital branches, as well as apps for all types of customers.
 
It soon became a leader in digital banking, with 12 million Buddy users and 26 million  mobile banking customers at the end of September 2017. As a step to support the fintech ecosystem, the bank created a Rs 2-billion fund to invest in fintech start-ups. Many solutions and services are expected to emerge from this fund, and will give the bank an edge.

 
A few months before ending her stint, Bhattacharya left the bank with a comfortable capital position by raising Rs 150 billion in equity capital from institutional investors in June 2017, taking the bank’s capital adequacy ratio to 13.3 per cent.
 
A former top SBI executive said the relationship of the head of the largest bank with the regulator, the RBI, is crucial. Unlike her two predecessors, who had run-ins especially with the regulator, Bhattacharya developed a good working relationship with both the RBI and the finance ministry. The central bank would take her opinions and insights seriously, said an executive at the Indian Banks’ Association (IBA).

 
With the Insolvency and Bankruptcy Code giving creditors more teeth, Bhattacharya was aggressive in her fight against bad loans, and has been instrumental in driving hard bargains in many NPA cases. However, she regrets that while handing over the baton to her successor Rajnish Kumar in October 2017, the task of asset resolution remains unfinished.