Are profits of PSU banks becoming hostages to Chairmen?

Earlier this week, a Deputy Governer of the Reserve Bank of India no less raised the issue that profits and losses of banks are becoming hostage to retiring or incoming chairmen, or something to that efect. This observation that profits of PSU banks tend to dip when the chaimen change has now become a bit of a derisive fact for stock market investors.

Among the banking fraternity, there are loud whispers that chairmen refuse to recognise NPAs towards the end of their career to avoid looking bad. As also, a tendency among incumbents to be more than cautious early in their tenure so that the profits start improving later in their career. Also read Find out why PSBs' profits alter with change in chief In an interview with CNBC-TV18's Latha Venkatesh, Former Finance Secretary, S Narayan, Former Oriental Bank Chairman & MD, BD Naranag and UR Bhat, Head, Dalton Capital, talk about the effect a new chairman has on the profits of a PSU bank. Below is the transcript of the interview. Also watch the accompanying videos. Q: Is this just an optical illusion or do you in your experience actually notice that incumbent Chairmen want to start with a slightly poorer performance so that they look good in their tenure. What is your comment on the kind of data that was presented to you? Naranag: There are two common things that make a serious impact on the bottom-line of the bank; that is pension provisions and NPA provisions, they are common denominators. Second is how we handle it. It is true that the incumbent would like to see that slate is cleared and he doesn