Plain speaking integrity: Meet Pratip Chaudhuri, former chairman, SBI

Former State Bank of India (SBI) chairman Pratip Chaudhuri’s arrest has come as a shock to the banking industry, particularly when the government is keen to shield public sector bankers from bona fide credit decisions that turn sour.

Chaudhuri was known to be a clean banker, and the allegations are not directed against him but pertain to the directors of a company on a deal that was approved by SBI after he retired from the bank. Chaud­huri’s appointment in the Alchemist Asset Reconstruction Company (AARC) was app­roved by the Reserve Bank of India (RBI).

Moreover, attempts to challenge the asset transfer were dismissed multiple times in various platforms including the debt recovery tribunal (DRT), police, high court, Supreme Court and even the Nat­io­nal Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code.

And yet the ease with which ex-promoters of a defaulting company could get a former senior banker arrested has demotivated bankers who take decisions on thousands of crores of assets but don’t have adequate legal support post-retirement if those decisions turn bad.

By law, a public sector banker cannot be arrested by state police unless on criminal charges. This particular asset transfer case was long established as a civil case. Technically, only investigative agencies and the Serious Fraud Investigation Office (SFIO) can order an arrest on fraud charges. Chaudhuri was arrested by the Rajasthan police from his Delhi residence working on an order by the chief judicial magistrate of Jaisalmer, without even a summons.

“To begin with, the case is not against Chaudhuri, but is against the ARC as far as I can make out, and yet only he has been arrested. He was at his residence in Delhi because he is upfront, honest, and a believer in law, “said Arundhati Bhattacharya, Chaudhuri’s successor as chairman in SBI.

“Chaudhuri has always been extremely meticulous, and scrupulously honest. It is unbelievable that such a man has been arrested without an opportunity to present his side of the matter. Bhattacharya told Business Standard.

Chaudhuri became the chairman on April 7, 2011, a month after O P Bhatt retired, and his term ended on September 30, 2013. 

His chairmanship was largely unremarkable business-wise, except for the Kingfisher saga. Chaudhuri declared Kingfisher a bad debt in January 2012 and went the whole hog to recover dues from the airline. The account remains in default, but the aggression by so-called “meek” bankers was led by Chaudhuri.

But Chaudhuri’s contribution to the SBI group is remembered for taking on the bank unions, which predecessors rarely did. As head of State Bank of Saurashtra, he was instrumental in pushing through its merger with the parent in 2008. As chairman of the group, he laid the groundwork for the five associate bank mergers with the parent in April 2017. Chaudhuri, it is said, significantly weakened the unions’ will to oppose the mergers.

As chairman, Chaudhuri was known as a micro-manager. He was outspoken and did not flinch from criticising the banking regulator. In fact, the friction between him and then RBI deputy governor, the late KC Chakrabarty, reached such proportions that a frustrated RBI Governor D Subbarao joked at a public event that he had constituted a committee in which the members would be Chakrabarty and Chaudhuri. “The two will be locked in a room and they can't submit the report till my term is over," Subbarao had joked.

Chakrabarty ultimately had to call time on the spat, describing Chaudhuri as a “superman” against whom a win was not possible.

Chaudhuri, however, remained a critic of the RBI, both as SBI chairman and after he retired. For instance, he criticised RBI’s sharp rate hikes in July 2013 in response to the US Fed taper tantrums, saying the move had created panic in the market and should not have been done so abruptly. The RBI was not amused, since the country’s largest bank had a big role to play in pacifying the market. He continued with his candour post-retirement, and TV clips of him can be found poking fun at people in power.

Chaudhuri caused minor irritation for being a stickler for detail and for clean accounts.

Unlike many bankers who insist on showing a sparkling record at the end of their tenure, Chaudhuri did not dress the books. In the March quarter of 2011, the bank’s gross NPA ratio was 3.3 per cent, net NPA was at 1.6 per cent, and capital adequacy ratio was 12 per cent. At the end of Chaudhuri’s tenure, in the September quarter 2013, these numbers were 5.6, 2.9 and 11.7 per cent. The bank’s market cap fell from Rs 1.75 trillion to Rs 1.1 trillion during his tenure.

Bhattacharya, his successor, therefore, did not have to suddenly show high bad debt and lower financials, a practice common in public sector banks where a new chairman starts with a clean slate by bringing upfront what was hidden by the previous regime.