Q: The Goa State Co-operative Bank is currently in turnaround mode. How much of the recovery is complete and what remains?
I think we have overcome the worst and currently are in growth mode. From here the position can only improve. The bank’s apex position and the government’s eagerness to make it strong is its biggest strength. It has the potential to be one of the best banks of Goa if professionally managed. As for turnaround it is an ongoing process and there is no end to it. Our immediate goal is to achieve standard CRAR of nine per cent (currently 4.7 per cent), bring down gross NPAs to less than five per cent of advances (currently 7.1 per cent) and achieve net profits of Rs 20 crore in 2018-19. The accumulated loss is decreased to Rs 56 crore, it needs to be brought down to zero.
Q: How much is the NPA in value terms?
It is Rs 109 crore. The mining NPA is of Rs 10 crore and most of it is to barge industry which we have not been able to touch so far. Some of the NPAs are from builders. We are trying to improve recoveries by selling assets of defaulting borrowers.
Q: What is the current focus of the revival measures?
Presently we are working on the human aspect. We are working on improving morale and motivating employees by laying down systems in promotions, transfers, etc. Earlier it was done in an adhoc manner but soon there will be a policy on HR. We are defining the system in all areas such as advances, deposits, recovery, etc. The bank has applied for ISO certification and the process is expected to take a year. Certification will improve employee productivity, increase efficiency and improve other parameters. Secondly, the term of the administrative committee ends in September 2018 and before that we want a new board to be in place. Shareholders have been asked to start the process of elections and get approval from the registrar.
Q: What do you think is the root cause of GSCB problems and reason for slipping into the red?
Although GSCB is a monopolistic position and an apex bank, it has not been able to draw upon its strength. The underlying reason for non performance are several but can be zeroed down to bad investment decisions, poor loaning practice by flouting all the rules and unnecessary staff recruitment. These factors continued over the years because of which the NPAs increased, there was no control on the costs and things started spiraling downwards.
Q: What is the guarantee against regression once the term of the administrative committee ends and new board takes over?
With the new systems in place the bank should run on systems not on the whims of the directors, officers, etc. What the committee found is that the systems and procedures are from when the bank started. They have not changed at all and become ineffective. The computer software was outdated. We wanted software to reduce the staff workload but on the contrary had to engage staff to prepare reports. So the committee is putting things in order. We analyzed each and everything. A total management quality consultant is appointed to improve efficiency and also a software expert. An expert fund manager is giving us higher return on surplus funds from earlier six per cent. In all this, viz. to have the organization not regressing, the role of the managing director is most important. The managing director has to be competent, knowledgeable. Because you cannot expect the directors who come from different fields to have knowledge of finance or banking. The MD has to tell the consequences so that directors are afraid of going against the systems. The current managing director is most competent and will be able to do all this.
Q: What are the changes made so far by the committee to set the tone for the future?
The first thing is we did is send the message that nobody is a VIP and all employees are the same. Even us as ordinary residents hate the trappings of wealth and status enjoyed by the influential and powerful. So we conveyed to the top bosses at the bank, “avoid VIP culture to prevent envy and enmity.” Another change that we did is cut down on wasteful expenditure on calendars, souvenirs, entertainment until full recovery is achieved. The committee also introduced the practice of end-of-the-day reconciliation of cash, bank and stock balances by the managing director with the managers. At the same time we have increased in-house training to make employees empowered. After these changes our deposits and advances are going up and there is not a single leakage into NPAs. We have formed an aggressive recovery team and employees have been made to understand that they have to seek increase deposits by going out of office and making field visits.
Q: Goa’s co-operative institutions are not in good health. They seem to suffer from discord. What is your opinion on it?
Unfortunately there is a strong element of rivalry between the directors of most co-operatives and they are trying to pull each other down. This is not a good thing because directors must work in unity. At present directors do not get any remuneration except for sitting fees. Perhaps a percentage of profits would incentivize them to work together for the growth of the organization and not bring it down. The profit sharing idea though is only my view but it could be explored.
You said that managing directors have an important role in overall functioning of the bank but in reality they are mostly submissive to the directors? Comment.
That is because the managing directors do not have the competence so they are hesitant to take action and start lacking enthusiasm. They need to be empowered to take hard decisions and make directors realize that they can come into trouble if there is a willful default.
Q: Do you think that the RBI norms with regard to capital adequacy, provisions for NPAs are too strict for urban banks?
No not strict but the action is jerky and it does not show the way. The RBI needs to apply the brakes on erring banks slowly but it takes action suddenly and there is no direction on how to improve things. Some of the urban banks which that RBI has stopped from doing business are just surviving on depositor’s money which is alarming and not in the interest of the state. In some instances there is opportunity for a sinking urban bank to be merged with healthy entity but the board of directors cannot do it because the shareholders oppose. In such scenario the RBI needs to be flexible and work out a policy to overcome the problem of shareholders objection. It will encourage takeovers of weak banks.
Q: Coming back to the turnaround process, it did it look like an impossible task when the control was handed to you as head of the administrative committee?
Actually no because I had similar experience of Mapusa Urban Co-operative Bank where I was appointed as an administrator by the government. And the situation then was worse as there was run on the bank two-three times and it was almost about to collapse. Somehow we improved things and the bank became lean and active. But now again it is in distress ……although that is a different story.