FORMS

Tuesday, March 24, 2015

Andhra Bank employees have recovered 95,000 bad debt accounts: CVR Rajendran

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