It’s a challenging time for state-run Indian Overseas Bank (IOB). The Chennai-based bank’s net loss continues to widen, bad loans are piling up, while slippages are rising. R Koteeswaran, MD & CEO, IOB, who took over the reins last January, is in a fire-fighting mode to get the octogenarian-bank back on track. Speaking to Sunitha Natti of Sunday Express, Koteeswaran exudes confidence about his challenges. Excerpts:
The bank’s financial performance was slipping when you took charge. What was the root cause and how are you going to fix it?
When I looked at the past few years’ performance, there were several things that were glaring. One was the CASA ratio, which has been flat for more than three years and there was no growth in percentage terms. One reason why the percentage was not increasing despite growth in absolute figures was, the bank was attracting high cost fixed deposits, which I’m shedding. The bank started booking losses from September last fiscal. In Q4, FY15, we made excellent recovery with a nominal profit, but had huge slippages. And as the debt restructuring period ended, loans couldn’t turn up but down.
What major changes did you implement?
We had an obsolete IT system, which was failing more often than working. Customers want quality service and we embarked on a project to replace it. The first pilot was done in December last year and so far we’ve migrated almost 400 branches and are going at an aggressive speed. The bank is good. Customers are good. Due to the economic situation, it (losses) went beyond control.
If business is good, why then is the bank registering losses?
When we classify NPAs, interest ceases to come, but expenses are increasing, or rather the same. As per Basel norms, we’ve to provide enormous amount towards NPAs and that’s eating into our profit. For instance, in the September quarter this fiscal, we earned around `1,000 crore operating profit, 70% increase over last quarter. Since we have to make a provision of over `1,500 crore, our losses stood at `500 crore. But, I am confident, we will turnaround.
How are you planning to reduce bad loans?
First, we have put in place a young and dynamic team to analyse data like NPAs, where the money was spent, which accounts can we recover easily, etc. As for big-ticket loans, most of the advances were lent via consortium of bankers and recovering such loans will take time. We are exploring all avenues, including attaching properties wherever possible, opting for Strategic Debt Restructuring, selling accounts to Asset Reconstruction Companies (ARCs). In just one tranche, we have put loans worth `900 crore with ARCs. More will follow.
What’s the way forward?
We have 3,500 branches but 59 administrative offices, 10-12 of which will be trimmed. We are improving our retail portfolio and in October alone, we disbursed `700 crore. Besides, we are putting thrust on SME sector too. The important element is, now, I’m focusing only on consolidation. Even if it means reduction in the overall business size. It’s a strategic move. You come down and then take a leap.