Government plans to swap CEOs of IDBI Bank and Indian Bank
MUMBAI: In a fresh attempt to revive the ailing IDBI Bank, the government plans to swap the CEOs of Indian Bank and IDBI Bank. Senior officials say that swap is in hope that a CEO with a longer tenure would be better positioned to turnaround the loss-making IDBI Bank. This would be first instance of a CEOs of a large bank moving to a smaller bank. In the past, government has elevated chief of smaller bank to bigger bank.
Kishor Kharat, CEO of IDBI Bank and M K Jain, CEO of Indian Bank could not be reached for comments. This development comes at a time when IDBI Bank has put a freeze on lending and branch expansion plans and is focusing on recovery of bad loans. The bank has also to contend with low morale after Central Bureau of Investigation took custody of five bank officials alleging impropriety in sanction of loans to Kingfisher Airlines.
Senior bank officials said that both the Reserve Bank of India and the government felt that IDBI Bank needs a CEO with a long tenure to draw up and implement a strategy to get the bank back on the rails. Jain has a residual tenure of three years while Kharat's term expires in the next 18 months.
Senior official familiar with the development said that the PMO (prime minister’s office) has cleared the appointments and the orders would be issued within one or two days.
IDBI Bank posted historic loss of Rs 2255 crore in the third quarter ending December 2016 as the bank had to make huge provisions for bad loans which were 15% of the total loan book. Due to poor demand for loans and non-payment of dues by defaulters, the net interest income too was down 45% to Rs 850 crore while non-interest income fell 5% to Rs 551 crore. Rating agency, Icra has downgraded the borrowings of the bank on concerns that the huge loss posted by the bank may erode the capital of the bank. Icra has said that the bank would need at least Rs 9000 crore to stay afloat, which is way above the money budgeted by the government for all PSU banks. Indian Bank under the leadership of Jain posted 700% rise in profit to Rs 373 crore in third quarter.
Kharat, a three decade veteran with Bank of Baroda, was one of the five bankers appointed by the government in August 2015. He was selected from a host of private and public sector applicants. Jain had joined Indian Bank in November 2015.
Kishor Kharat, CEO of IDBI Bank and M K Jain, CEO of Indian Bank could not be reached for comments. This development comes at a time when IDBI Bank has put a freeze on lending and branch expansion plans and is focusing on recovery of bad loans. The bank has also to contend with low morale after Central Bureau of Investigation took custody of five bank officials alleging impropriety in sanction of loans to Kingfisher Airlines.
Senior bank officials said that both the Reserve Bank of India and the government felt that IDBI Bank needs a CEO with a long tenure to draw up and implement a strategy to get the bank back on the rails. Jain has a residual tenure of three years while Kharat's term expires in the next 18 months.
Senior official familiar with the development said that the PMO (prime minister’s office) has cleared the appointments and the orders would be issued within one or two days.
IDBI Bank posted historic loss of Rs 2255 crore in the third quarter ending December 2016 as the bank had to make huge provisions for bad loans which were 15% of the total loan book. Due to poor demand for loans and non-payment of dues by defaulters, the net interest income too was down 45% to Rs 850 crore while non-interest income fell 5% to Rs 551 crore. Rating agency, Icra has downgraded the borrowings of the bank on concerns that the huge loss posted by the bank may erode the capital of the bank. Icra has said that the bank would need at least Rs 9000 crore to stay afloat, which is way above the money budgeted by the government for all PSU banks. Indian Bank under the leadership of Jain posted 700% rise in profit to Rs 373 crore in third quarter.
Kharat, a three decade veteran with Bank of Baroda, was one of the five bankers appointed by the government in August 2015. He was selected from a host of private and public sector applicants. Jain had joined Indian Bank in November 2015.
