The turnaround man: MK Jain's journey from fixing a struggling bank to becoming a central banker

The turnaround man. That's what Mahesh Kumar Jain is known as in the banking industry.

MK Jain was appointed deputy governor of the Reserve Bank of India for three years on Monday, filling a position that was lying vacant for close to 10 months since the retirement of his predecessor SS Mundra in July last year.

The media-shy and reticent banker got the turnaround-man moniker during his stint as managing director and chief executive officer at Indian Bank. It certainly seemed that Jain carried his form with him when he moved to IDBI Bank as MD and CEO, but that was before the central bank decided to dial him up.

Making a mark

Jain headed Indian Bank from November 2, 2015 to March 18, 2017. Before that, he had been an executive director for a couple of years who also carried out the responsibilities of MD and CEO between June and November, 2015, after which he took over in a full-time capacity.

Under Jain's direction, the state-owned lender worked on trimming its liabilities, reducing its reliance on high-cost bulk deposits and pushing up the share of low-cost current and savings accounts (CASA). In only three years, CASA's share in total deposits jumped to 37.65 percent from 28.01 percent earlier.

During his stint, Jain managed to affect a turnaround at the bank and create a strong institutional setup to implement HR reforms and digitisation. His success at Indian Bank catapulted the highly regarded but little-known executive into the limelight, turning him into a sought-after CEO among public sector banks.

Jain's efforts culminated in Indian Bank becoming one of the best-performing public sector banks in the country. Although the bank saw its net profit plunge by around 60 percent to Rs 84.49 crore in the March quarter of FY16, its bottom line improved considerably to Rs 319 crore by the corresponding quarter a year later.

Banking career

MK Jain learnt the ropes at Punjab National Bank (PNB). A postgraduate in commerce, he joined the bank in the mid-1980s and specialised in credit, covering the markets in Haryana, Chandigarh and Himachal Pradesh.

In December 1999, he was part of a four-member team that developed a risk management architecture for PNB in association with the Boston Consulting Group. In addition to this, he completed his MBA, did a course on financial risk management and trained as a chartered financial analyst to hone his credit analysing skills.

His next move to Syndicate Bank as assistant general manager (credit) required him to move base to the southern part of the country. He worked in the bank's risk management department between 2005 and 2011, but got a plum position in January 2012 when he was appointed the zonal head for Mumbai.

In a year and a half, Jain was successful in achieving 20-25 percent year-on-year growth across key areas, including retail and corporate credit, operating profit and a proportionate decrease in cost of deposits.

The certifications and degrees that Jain holds are M.Com, MBA, CAIIB, CFA and FRM.

Unfinished task at IDBI

After turning around Indian Bank, Jain was hoping to follow it up with a similar success story at IDBI Bank.

The senior public sector banker, aged 56, moved to IDBI Bank in April last year, at a time when close to a quarter of the bank’s loans were non-performing. IDBI Bank was at the time the lender with the most non-performing assets (NPAs) on its books.

It is true that the bank's gross NPAs, as a percentage of total loans, rose to 27.95 percent in March quarter this year, primarily due to the unexpected February 12 circular by RBI on recognition of NPAs. But the share of bad loans in total advances had been on the decline, falling to 24.72 percent at the end of December last year from 24.98 percent at the end of September.

As MD and CEO of IDBI Bank, Jain was instrumental in beefing up the bank's capital, reducing its exposure to corporate loan accounts to 55 percent from 60 percent at the end of March last year, and increasing its provisions for bad loans in order to cushion the lender's potential losses.

The bank's provision coverage ratio (capital set aside for bad loans) shot up to 63.40 percent as at the end of March, from 54.96 percent a year ago.

Common equity tier-1 capital rose to 7.42 percent at the end of the March quarter from 5.64 percent at the end of the corresponding quarter a year ago. This will help the bank improve its capital strength to meet RBI's requirements, and also to come out of the prompt corrective action (PCA) framework imposed on it by the central bank last year, thereby restricting its expansion plans.

Alas, Jain did not get enough time to see IDBI Bank's turnaround story through.

Industry roles

Apart from high-profile executive roles, Jain has also donned many hats in the industry.

He was a member of the Steering Committee on Risk Management of the Indian Banks Association and a member of the IBA working group on Risk Management and implementation of Basel-II and -III.

He was also Secretary and Coordinator to the Basant Seth Committee on Review and Revamp of Internal and Concurrent Audit System in public sector banks, and has been a director at Export-Import Bank of India since July 12 last year.

Jain was also a member of the government-constituted Committee on Public Interest Litigation on NPAs, which was to submit a report to the Supreme Court.

He served as a member in the IBA committee constituted by the government for redesigning the annual performance appraisal reports of officers at public sector banks.