Consolidation should not be seen negatively, says BoB chief

The overall takeaway from the recent Gyan Sangam meet is that banks should be more focussed on recovery and that they will be provided with requisite support from the government to fight the ongoing NPA crisis, says Bank of Baroda MD and CEO PS Jayakumar.In an interview to CNBC-TV18, Jayakumar says there were several other takeaways from the two-day Gyan Sangam summit, which concluded Saturday: bank consolidation, non-performing assets, carrying out changes to recovery laws and giving out employee stock options.  Consolidation should not be seen negatively as the objective of consolidation is to build world class banks, he says, commenting on niggling concerns among industry followers on impact of consolidation of weaker banks with stronger ones on the latter. 

He avoided putting out a timeline on the implementation of the employee stock options (ESOPs) plan, discussed at the Gyan Sangam meet, saying it is a policy decision and will come in due course.

There are no fresh developments in the Central Bureau of Investigation’s (CBI) probe on the illegal foreign exchange remittances scam at the bank, he says.Below is the verbatim transcript of PS Jayakumar’s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Latha: The stock has taken a 2 percent down tick. I guess one of the big fears is that if consolidation is the mood going forward, your bank being one of the few strong banks will have to be taking over a weak bank. Was that the message from the Gyan Sangam?A: Quite to contrary, the objective of the consolidation is to build world class banks. It is not intended to diminish anybody. It is also a reasonably democratic process; smaller banks have the choice not to be part of any merger but choose to become specialised institutions. So, I don’t think it has to be viewed negatively. The real objective is to build large sizeable institutions that have diversified portfolio, etc. So, on the balance, I think it should be treated positively than negatively. Sonia: The other disappointment perhaps is that from the Gyan Sangam there were no major takeaways as far as the solution to stressed assets is concerned, the asset reconstructions companies (ARCs) etc. That is what we understand, but what have you taken away from the Gyan Sangam, has there been any talk or solution on what should be done with stressed assets? A: I think the coverage in the media with respect to Gyan Sangam has been fairly comprehensive. Specific to the issue of stressed asset, I think the message has been that banks will be very focused on recovery and there has been a discussion around to strengthening a number of legal processes around Debts Recovery Tribunal (DRT), around the new expected Bankruptcy Code, etc. So, specifics apart, the overall direction is that banks will be very focused on recovery and there is going to be a bunch of support available from the government particularly in the legislative, in the administration of the legal process. So, that is where it is.Latha: There was a niggling worry over the weekend, the CBI put out a statement saying that they have made additional searches with respect to that fraudulent foreign remittance transactions which they were investigating and that fraud if you remember originated for some of Bank of Baroda branches in Delhi. Were you contacted, is there any update you can give us on the impact of this investigation on the bank? A: Let me put it this way, as far as I know there has been no raid on the bank or any connection with our employees. I will recheck that but not to my knowledge. So, if there is something that CBI is saying they found then I think the source is the CBI and we have to check with them. We are also reaching across and trying to ascertain and we shall soon come with a clarification on this matter. However, to my knowledge, this is a part of the continuing investigation, some information being available and these may or may not relate to Bank of Baroda itself. Latha: They haven’t said it relates to you, they have only said that they have investigated some private parties without mentioning any names at all, hence the need to check with you. A: It is too broad based to comment on. There is some investigation, some people have been found with something, how does it connect to Bank of Baroda, how does it involve we don’t know. There is nothing specific to comment upon but nonetheless we will go through the details and come back to you with some comments as we go through the day. Latha: How quickly will ESOPs be given, that was one of the things that the Gyan Sangam spoke about? A: I can’t tell you the exact timeframe because that is a policy decision but on the balance it seems to me that they are quite keen and getting this through and addressing the gap in long-term compensation plan for senior executives in the banking system and the public sector banking.