Without SBI, Yes Bank would not have been saved

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Rajnish Kumar’s three-year term as State Bank of India (SBI) Chairman was a roller-coaster ride from Day 1. A pandemic, a private bank bailout and a deep economic slowdown – all happened during his term. Kumar played a key role in bailing out Yes Bank. During his tenure, SBI has substantially cut down the chunk of toxic assets and successfully completed the amalgamation process of its associates.

How tough was your three years as SBI Chairman?

Kumar: There were many challenges in the last three years. When I took charge, the merger process (with associates) was on, and then AQR (asset quality review) happened. There was significant stress on the books. And, of course, IBC (insolvency and bankruptcy code) also happened during that period. Having said that, I feel one can get tested only when there are challenges. If you are only doing your routine job, there is no excitement. That’s how I have managed this time. Challenging, but exciting.

How did the NPA battle go?

Kumar: The challenge was to get a handle on the NPA resolution by strengthening the stressed assets resolution. So, all NPAs that were spread across were brought into one group and very competent people were posted in that group to handle NPAs. This has shown results. At the start itself, that was the biggest challenge.

What are the biggest pain points in NPA management at this juncture?

Kumar: It has always been corporate NPAs. Corporate NPAs are what causes the biggest problem. Now, of course, net corporate NPAs are just Rs 10,500 crore, which is virtually nothing. What I’m saying is that the bank doesn’t get impacted by retail as much as by corporate NPAs. At one point, it constituted 25 percent of the corporate book in NPAs and that was the whole cause of the problem. Now, it has been brought down. But, you have to be very careful. Retail is manageable.

You have an Advance Under Collection Account (UACA) for chronic NPA cases

Kumar: AUCA is essentially an accounting entry. The on-balance sheet NPAs, which are already fully provided for and where net asset value is almost close to zero, can be taken off the balance sheet. But it doesn’t mean that that account will not be followed up and there will be no recovery efforts. So, the first thing was to put the balance sheet in order. We ensured that not everybody should be spending time on NPA management and should focus on other functions as well.

Are you disappointed with the progress in the Vijay Mallya case?

Kumar: The attempts to recover money from Mallya continue. His properties were attached and pledged to the bank by the Enforcement Directorate. The extradition matter is between the government of India and Vijay Mallya. Whatever security the bank had to enforce and realise money have been done. The bank has been able to recover about 25-30 percent (from the Vijay Mallya-Kingfisher account).

Can you list the three most critical challenges in SBI right now?
Kumar: The first, of course, will be COVID-19. The bank needs to be very watchful on this, although the major stress is already addressed. Second is maintaining the competitive edge of the bank in a tight competitive environment and continuing the leadership position. The third is keeping an eye on the earnings profile, and keeping a handle on NPAs. The institution should keep NPAs under strict control. Don’t lose the leadership position.

What is your advice to your successor?

Kumar: Well, he (Dinesh Kumar Khara) has been part of the team. My advice to him will be to adhere to the core values of the bank. If somebody adheres to the core values of the bank, there will be no problem in managing State Bank.