Merger with Allahabad Bank is the most challenging, but satisfying phase in my career: Indian Bank MD and CEO

How smooth was the amalgamation process of Allahabad Bank with Indian Bank?

The amalgamation exercise ‘Project Sangam’ had a three-pronged approach on product/process, employee-customer communication and IT integration. HR integration was an area of concern, but steps were taken even before amalgamation to encourage more engagement and interaction between the staff of both banks through common training programmes, common portal to give suggestions/air grievances. In handling employee issues such as transfer and promotions, we have ensured fairness and transparency in the whole exercise.

The hallmark of this amalgamation is transparency. All stakeholders, including customers, were informed regularly, despite the challenges posed by Covid-19. This has played a big role. While there was participation from all levels in the amalgamation process, the attitude of the staff from both banks in welcoming the amalgamation and adjusting to the new system, was impressive.

Even in an environment of uncertainty, fear and anxiety, the process was quite smooth, thanks to the support from employees of both banks.

Are you in a position to say amalgamation is complete in all respects?

In the last leg of amalgamation, the bank successfully completed the integration of CBS of both banks on February 14, with minimal downtime to customer banking operations. All 3,000-plus branches of the erstwhile Allahabad Bank are seamlessly integrated on Indian Bank’s CBS platform in one go as a ‘big bang’ approach.

Rationalisation of 200 branches has been completed against our target of 100 branches in the first year of operations. The bank is realising savings in administrative costs such as rent, while significant savings are also coming from other areas.

Initially, it was thought that our merger would be one of the toughest as different geographic areas were served and both banks were of almost equal size. However, the last 15 months have been a very valuable and interesting experience to all of us, proving how meticulous planning and attention to detail in execution can win the day.

The amalgamation is the most challenging phase in my career, but it is also the most satisfying one. If I look back, Further, we have invested a lot in IT and digital during this phase, and benefits of the same will start flowing in to make us much more competitive in the banking sector.

Which are some of the sectors that are still under stress?

Hospitality, travel, tourism, educational institutions are yet to pick up. In Indian Bank, given the diversification of exposure, we do not have large exposures to these sectors. Sector-wise analysis shows more stress in MSME.

Being a big lender to the MSME segment, how do you view the stress and recovery levels in MSMEs?

Our MSME book size is about ₹70,000 crore and we have sanctioned about ₹5,106 crore to the MSME sector under GECLS, covering about 2 lakh borrowers. Of this, more than 90 per cent has been disbursed. There is still a need to offer much more support to MSME sector as it is one of the crucial sectors in the growth of our economy. While the services segment in MSME category has seen some recovery, manufacturing MSMEs are still facing cash flow challenges as some money is stuck with public sector corporations and large corporates in the form of receivables.

Some of the additional measures that can support MSMEs include routing of payments to MSMEs by corporates / PSUs / government through TReDS platform; facility of reassessing the finance to MSMEs by taking into account revised working capital cycle, and relaxing the margin requirements to be extended till March 31, 2022 (it was permitted up to August 31, 2020, with a condition to restoring to normal margin by March 31, 2021) and extending restructuring facility for further period of at least six months.

In terms of restructuring what is the likely number as a percentage of overall book for FY21, and could you provide a mix on the sectors?

Overall, there was no big demand for restructuring in the retail segment. The reasons that can be attributed to it being the impact on their credit history and also that the disruption due to pandemic was manageable for most of the salaried class, which is 65 per cent of our retail borrowers. Sector-wise, corporate segment responded to the restructuring, with 1.13 per cent of the total standard advance getting invoked. The overall book under restructuring is 1.48 per cent to the total Standard Advance as on February 2021.

Indian Bank undertook rejig of business model for RAM category. Could you explain the objectives and outcomes?

The bank has introduced retail, agriculture and MSME processing centres, pan India, where all loan proposals sourced from the branches are processed. The main objective of this model is to improve the quality and reduce the turnaround time (TAT) in sanctioning of loans. This will enable us to utilise the manpower at branches for extending wholesome service to customers and to bring in new customers to our fold. We initiated this in August 2020 and the results have been rewarding. For example, in home loans, TAT has come down to 1 week-10 days from 1 month earlier.

What are your focus areas for loan growth in FY22?

We are better prepared to give good results, possibly with a low double-digit growth in FY22, despite the prevailing environment. With government accelerating vaccination, we hope things should get back to normal soon. We propose to concentrate on industries with low/moderate risk. We are entering into working capital consortium pact in many corporate accounts to further strengthen the relationship. Housing and vehicle loans will continue to be our core area of operations in the retail segment. Also, we will target loans to salaried, pensioners and other mortgage loans while making corporate salary package and educational loans more attractive. Digital banking will receive a thrust in the coming year.

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