Andhra Bank is on a mission.
The mid-sized public sector bank aims to recover the Rs 6,000 crore of bad
debt. Its employees are protesting outside the premises of the loan defaulters,
and the protest is quite infectious with peers from other banks starting similar protests to recover bad
debts for their respective
banks.
The bank, on the other hand,
has empowered all its employees in its pursuit of loan defaults. In Srikakulam
district in Andhra Pradesh, for instance, the bank's security guard was awarded
for recovery of about Rs 6 crore of debt. A sanitary worker was awarded for her
efforts while the best performer was a 24-year-old rural development officer
who resumed work three days after her marriage to achieve the targets she had
set for herself.
The man who initiated this
extraordinary movement is CVR Rajendran, chairman and managing director of
Andhra Bank. In an interview to dna, Rajendran tells Manju AB that there are
issues with high-profile borrowers who feel ashamed about the bank employees
standing outside their gate with placards, "but we are persistent".
During the Telangana agitation
for splitting the state into two, the agitators on the Telangana side attacked
the bank's offices, blackened the bank boards and shut its branches just
because it has 'Andhra' in its name. "We held on and not only continued to
operate all our branches on the Telangana side, but also undertook massive branch
expansion which helped us to become second largest market share holder in the
newly-formed Telangana state. We have clear strategies in place to become No.1
in the state in the next two years."
How did you get the
unions for productive work?
It all started with a news item published in one of the
business daily stating that the Andhra Bank is going to be merged with either
Bank of Baroda or Punjab National Bank. All employees of the bank have their
pride, which will be lost if they get merged with a larger bank. They will get
a step-motherly treatment. The only reason behind the merger move is the
increase in stressed assets and inability to raise capital to support growth.
So I made a presentation to our employees union on how they could help in
increasing the net profits of the bank which when ploughed back will result in
sufficient capital adequacy. Mobilising CASA (current account saving account)
deposits to reduce cost of deposits, increasing yield on advances by focusing
on retail lending and recovery of non-performing assets (NPAs) to reduce
provisioning requirements and keeping a check operating cost by switching to
alternative delivery channels are a few of them. Both the officers association
and employees unions have taken it seriously and started working on it. If we
manage to recover Rs 8,900 crore of NPAs (including written-off accounts) and
reversal of provision of Rs 3,500 crore, the bank will sit on a capital of Rs
7,000 crore, which along with our annual profits are sufficient to meet our
capital requirements for the next five years. The bank will be able to pay
higher wages without employees having to agitate for it. When the returns are
directly linked to their salaries and the possibility of avoiding any merger
move, the employees are galvanised and then, it spreads from branch to branch.
Now it involves every staff member, from a sanitary worker to chairman. Each
staff member is allotted with 50 accounts and the top 25 bad loan accounts are
with me.
Name some high profile
cases you managed to crack?
On March 20, we have taken over the Annapoorna Studios at
Jubilee Hills in Andhra Pradesh, owned by famous Telugu film actor Akkineni
Nagarjuna and his family. We won the case in the debt recovery tribunal in
respect of the Deccan Chronicle Holdings Ltd after a prolonged battle. Under
the Rajiv Gandhi Graha Kalpa Housing Scheme, Rs 1,00,000 was given to slum
dwellers for building pucca houses and the government gave a subsidy of Rs
100,000. The buildings came up and the slum dwellers unauthorisedly sold off
the flats in the open market. We had 1,500 accounts in Vishakapatnam alone.
Employees unions contacted the police and, armed with a revenue officer, they
entered the premises and threatened to evict the occupants. About 70% of the
house owners did a one-time settlement with the bank.
Will the NPA camps
bring down your bad loans?
In the fourth quarter, bad loans will come to 5% of our total
advances from the prior 6%. Recovery efforts of the bank has reached the
doorstep of companies. So what remains is only the retail customers of the
bank. Industrialists, politicians and retail customers who have the money but
are willfully defaulting will not be spared. In Chennai, for example, employees
have been standing in front of Jeypore Sugars and Distilleries, owned by a
former central minister's family, and Empee Sugars. In Mumbai, Kamath Hotels
was handled with the same treatment. In almost all the zones across India,
peaceful demonstrations are being undertaken before the defaulting borrowers.
Employees were given a target of recovering money from one lakh accounts; they
have been successful in recovering 95,000 accounts involving several crores of
rupees and that is a milestone for a medium-sized bank like ours. And, mind
you, all the employees are working after banking hours with no overtime dues.
The young girl who resumed work three days after her marriage started visiting
villages from 6 am till around 8.30 pm without any additional compensation.
Chairmen will come and go, but for the employees the bank is their refuge,
their pride and their livelihood. I am training them to play a meaningful role
in the board as they know the ground level realities much better. They have no
veto power but at least their objections will be recorded.
Despite the bad loan problem,
Andhra Bank was able to report the highest quarterly profit in the third
quarter. How did you manage this?
The bank's cost of deposits came down by 18 basis points
after we shed all our bulk deposits. Even from Tirumala Tirupati Devasthanams
(TTD), wherein we are the prime banker, we returned entire maturing deposits as
their rate expectations were much higher. Yield on advances increased by 51
basis points as we increased our retail portfolio and SME loans. There will be
recoveries amounting to Rs 600 crore in the agriculture portfolio with the
government disbursing funds as part of the agri loan waiver scheme. We have
opened 400 new branches in this financial year without a single recruitment.
Business per employee has improved. Operation costs are down.
Besides agriculture,
you also have large loans that have taken a hit?
The splitting of the state is also impacting us. The
government is not giving scholarships to students from Andhra Pradesh, and
schedule castes and schedule tribes form one-third of the students in these
colleges; as a result 34 engineering colleges have shut down. We have lent to
these institutions. But our major problem is power and infrastructure, which
form 12.77 % of our advances. Coal block auctions and other related policy issues
should help us. Gas-based power plants wherein we have Rs 1,000 crore exposure
do not find a solution yet. EPC contractors are entangled with many litigation
and arbitrations on. Hopefully, they will get their payments shortly and
regularise their accounts .
What would be your
credit strategy?
The focus is going to be on small loans, increasing exposure
to stronger government or quasi government entities, public sector enterprises
and focus on smaller ticket loans in the private sector. We are reducing our
concentration risk by branching to outside Andhra Pradesh. We have created nine
new zones in Gujarat, Pune, Jaipur, Ludiana, Bhopal, Patna, Coimbatore and
Kochi. When segregated, each one of them had 30-40 branches. Over a period of
two years, each one of them will have 100 branches. In all these places focus
is on mid-corporates, MSME and retail loans.
dna