Mumbai: Pallav Mohapatra, the new managing director and chief executive officer at loss-making Central Bank of India, prefers to take a hands-on approach in running the bank. His 10am meetings with the bank’s executive directors and general managers for risk and treasury sets the tone for the day.
Mohapatra, who was at State Bank of India (SBI) till September, has initiated steps to turn around Central Bank, which has been reporting losses for the last 12 quarters—since December 2015. One of the changes is to take a bullish approach toward the commercial paper market (CP), instead of letting excess liquidity idle away in statutory liquidity ratio (SLR) holdings. The bank is trying to lower its SLR holdings from the current 29% to around 23% gradually, by moving the excess liquidity to the commercial paper market.
The bank has been under the Reserve Bank of India’s (RBI) prompt corrective action framework since 14 June 2017 which curtails its lending power in favour of conserving capital.
“Every day, for the treasury operations, I devote half-an-hour to my treasury team. I look at how things are moving and I tell them from which sources they should pull out and where should they invest in,” Mohapatra said in an interview.
He added that by doing so, the bank is attempting to reduce the volatility associated with the bond market. “Instead of this, if I see a better yield in a CP, I would like to reduce the excess SLR investment. Since there is a risk associated with CPs, I have done a risk assessment to decide in which CPs I should invest in,” he said, adding that in case of lack of good CPs to invest in, the bank will go into high-yielding treasury bills or in the state development loans (SDLs) rather than the overnight market.
That apart, Mohapatra is putting in place a structure where a couple of corporate loan branches will be created to handle loans of ₹50 crore and above. These branches will directly report to the general manager for credit at the head office. Similarly, the bank is creating a vertical for stressed assets and has received board approval for it. In the earlier structure, branch managers reported to regional managers, who reported to field managers, who reported to vertical heads and who in turn, reported to executive directors.
“Now, when the credit and stressed assets are taken out from the field, the focus of the field GMs will be on retail deposits and loans. As of today we have around 13 zonal offices and we will be consolidating them, although we have not decided into how many,” he said, adding that this streamlining would cut down the turnaround time.
The bank is also planning to shut 20 branches in metro and semi-urban areas and has also identified some currency chests to surrender to the RBI. It has also identified some high-rental metro and urban branches from where it wants to exit.
With more than 21% of its loans having turned bad, the bank wants to contain slippages so that the asset quality does not worsen any further. At the end of September quarter of FY19, the bank’s gross bad loans stood at ₹37,411 crore and slippages stood at ₹2,611 crore.
“Our plan for the current year is to not have more than ₹1,500-2,000 crore in slippages every quarter of FY19. Next year, I want to contain slippage to less than ₹1,000 crore per year,” Mohapatra said, adding that this will restrict the interest reversal on account of slippages.