The Hindu Business Line : <I>True hero of a turnaround </I>

At a recent function in Chennai to kick off Indian Bank's centenary celebrations, the Finance Minister, Mr P. Chidambaram, recalled that in 1996 the big question was whether or not the bank would survive. He went on to make special mention of two former CMDs of the bank as deserving of praise for the turnaround — Ms Ranjana Kumar and Mr M. B. N. Rao.

Of course, that might seem somewhat unfair on Ms Ranjana Kumar's predecessor, Mr T. S. Raghavan, in whose time, the bank made its first operational profit since turning in huge losses in 1996. But there is no denying that both Ms Kumar and Mr Rao are expert bankers, with long experience before they took the helm at Indian Bank.

They did a great job of boosting staff morale and generally keeping the bank going during what was perhaps its most turbulent period. But even they would be the first to accept that the turnaround owed a great deal to timely equity infusion by the Centre. In a sense, if one were to look for a real hero in the bank's transformation, it surely must be the tax-payer.

Consider the sequence of events. In 1997-98, the bank received Rs 1,750 crore as equity infusion. That was promptly reinvested in `recapitalisation' bonds issued by the Government. A further Rs 100 crore was injected the following year. On the last day of 2001-02, the bank got another Rs 1,300 crore, with a further Rs 770 crore of recapitalisation the following year. Thus, a total of Rs 3,920 crore was injected into the bank's equity between 1997-98 and 2002-03. While the transactions did not add to the cash in the bank's kitty, they did improve substantially the bank's income by way of interest accruing on such recapitalisation bonds.

The turnaround was also aided by the impact of two other factors impinging on banking operations at that time. One was the trend of falling interest rates, because of which banks' treasury profits rose to an unprecedented level. The other was a marked improvement the in the recovery climate, thanks, first, to the SARFAESI Ordinance and then the Act, and the periodic `one-time settlements'. Bumper treasury profits enabled bankers write in huge provisions and bring down net NPA levels. For sure, these trends were across the industry, not specific to Indian Bank. But the bank benefited greatly. `Other income' of Indian Bank rose from Rs 275 crore in 1999-00 to Rs 524 crore in 2003-04.

While Ms Kumar and Mr Rao left their stamp on the bank, the true hero of the bank's spectacular turnaround is the Indian tax-payer.

M. Ramesh

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