The Hindu Business Line : ‘We want to be the best in our home turf’

Mumbai, Sept. 4 “We would like to be a 25 per cent player in half of the country rather than be a five per cent player in the whole country,” said Dr K.C. Chakrabarty, Chairman and Managing Director of Punjab National BankOne thing is clear. He wants PNB to become “the dominant player” in the Indo-Gangetic belt. The second largest public sector bank is already a large player in the region.

But Dr Chakrabarty wants to build on the bank’s current strengths and occupy the number one position with a large market share in the region. In other words, he would like to see PNB to be the strongest player in its home base — the Indo-Gangetic plain — rather than being a runner-up with a national reach.

“The next stage of growth will be in the Indo-Gangetic belt. We have a sizeable presence there. And we have the ability to exploit that,” Dr Chakrabarty said.

But the immediate focus is something more crucial — to bring down the non-performing assets to below two per cent from 3.6 per cent currently — one of the highest among the public sector banks.

In an interview with Business Line, Dr Chakrabarty said with 67 per cent of branches in rural and semi-urban areas, the bank has a large number of loans in the farm sector. Over the last two years, easy credit availability and risi ng interest rates saw a large number of its assets turning into bad loans.

For him, NPA is “non performing administration” (not assets). I have to make administration perfect. I need to focus on this,” he admits.

Lack of manpower

PNB, as any other public sector bank, is facing a problem of manpower, with the average age of the staff being 49 years. But Dr Chakrabarty does not believe in exit policy or incentive schemes. This is because, in an exit policy the “good employees will go. You cannot make an employee more productive by just giving an additional incentive. If salary is not an incentive, then nothing can become an incentive,” he said.

He said manpower management is a problem at all levels. “We have to address this issue. Availability of skill and talent may be a problem at the salaries being offered. These are issues which will be solved over a period of time.”

Before taking over the mantle at PNB, Dr Chakrabarty was CMD at Indian Bank. As he was the Executive Director of PNB till June 2004, he is quite familiar with the strengths and weaknesses of PNB.

Biz consolidation

The bank needs to consolidate its business. “We will concentrate on customer-based deposits and advances,” says Dr Chakrabarty.

The bank is looking for a credit growth of 19-20 per cent and a 16-17 per cent growth in deposits. On the non-interest income side, the bank will provide various types of fee-based services such as remittances, inter-city cash transfers, cash management and selling of mutual funds, insurance and other third party products.

He says effective costing and pricing for fee-based services is very important. “I have become the cash manager of many people. We may have to charge people who deposit huge amounts of cash. If I lose a customer because of this, so be it. If a customer who does not give profit to the bank does not come to the bank, the bank gains,” he says candidly.

Core banking

Technology is the next on the chairman’s agenda. “Core banking has to start. It must take care of 1,00,000 terminals,” he said.

Expansion of the bank’s network need not necessarily be through branches, as he explains “Branches have lost relevance. Delivery model will undergo a change. Wherever there is a laptop, the bank can reach there, provided it is integrated with the core banking system. The number of traditional branches will not go up. But touch points will go up - ATM, satellite offices, small Internet banking offices, business facilitator and correspondent delivery models.”

Restructuring arms

There will be a re-look into PNB’s subsidiaries, such as Principal PNB Asset Management Company, PNB Housing Finance, PNB Gilts and the proposed joint venture for insurance with Vijaya Bank, Principal Financial and Berger Paints.

“All subsidiaries’ functioning will be re-examined and see how they can add shareholder value. They may be merged or even discontinued. The exercise may take six to eight months,” Dr Chakrabarty said.

“Restructuring, re-examining is a continuous process. Whenever we don’t get the desired result in terms of return and volume, then the management must look into that,” he said.

Open to consolidations

After two successful takeovers of Nedungadi Bank (2003) and New Bank of India (1989-90), PNB is still open to more consolidations. “The time for commercial merger has not come. As and when it comes, we will definitely look for a bank, as PNB is a big bank. Right now there are regulatory, societal and market issues. Consolidation comes in any industry when there is proliferation of production. In India 60 per cent of the population has no access to bank accounts now. That has to change,” he said.

Overseas expansion

The last step would be to focus on overseas expansion. Currently the bank has a subsidiary in London, a branch in Kabul and representative offices in Shanghai, Dubai and Kazakhstan. There is a proposal for a subsidiary in Canada, a branch in Hong Kong and plans to upgrade Shanghai and Dubai to branches. The Hong Kong branch is likely to open by the end of this year.

“But I have to improve the internal administration first,” Dr Chakrabarty said.

More Stories on : Interview | Public Sector Banks | Punjab National Bank

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