New PNB CEO promises 'innovative ways' to tackle NPA issue

The government's seven-step Indradhanush initiative announced last week to push through public sector bank (PSB) reform is a "comprehensive" one, says newly-appointed Punjab National Bank CMD Usha Ananthasubramanian.In an interview with CNBC-TV18, Ananthasubramanian said as chief of the country's second largest state lender, she was focused on tackling the thorny NPA issue that has troubled all PSBs by using "innovative ways".She also pitched for the need to professionalize bank boards and said the set up of a Bank Board Bureau was a positive step.On beleaguered sectors that are providing the most stress to the banking system, the PNB chief said there was also a need to professionalise struggling power distribution companies and that government intervention is required to resolve issues related to the steel sector.Below is the transcript of the interview on CNBC-TV18.Sonia: Everyone would like to know what would be your three or five pronged agenda as you enter the bank in order to solve the asset quality issues that the bank has been plagued with for so long?A: Punjab National Bank (PNB) comes as a bank with more problems of asset quality. I for one would say the traditional methods of approach have not yielded great results. So as I takeover I would look at some more innovative ways of tackling the non-performing assets (NPAs). It\\'s just few hours that I have been in the bank but the readymade solutions are not getting the right kind of answer or result for the bank. I have already asked my team and there has to be a lot of out of box thinking and how the stressed borrower and the stressed bank meet and how we can take it forward.Latha: How have you looked at reforms announced? What stands out? Was anything different?A: For one I would say that first time there has been a comprehensive announcement that has been made which we need to appreciate because always it use to be in bits and pieces maybe capital infusion announcement or something here and there..Latha: This is also a collation of already known announcements.A: Right but it has been made comprehensive. We need to look at positives because there are two ways of looking at it but I for one would look at it more positively because it is a beginning. Any announcement or any reform measure has two sides of the coin; you have the good and the bad but as a public sector banker, I would look at it as a beginning of the reform.In 1991-92 when the reforms were made, again when the deregulation set in, there was feeling of what will happen etc. However, in a way it is a step moving forward in the reform agenda.Sonia: Don't you think that some of the issues like the Bank Board Bureau, don't you think that adds in unnecessary level of bureaucracy and could perhaps slowdown the decision making process?A: Ultimately you need to get into professionalism. All these days we have seen bureaucracy dominating and it is going to be a set of people coming in. It is not the bureaucrats along -- because they form part of the setup, they run the ministries, so they ought to be there. So if the professionals chosen and of course the regulator is going to be there, the rest of them, if you really bring some experts, professionals - I think that will give some fillip to the way the selection happens, the way non efficient director -- because what takes the public sector bank from my point of view it is the board. You need to have professionals running the board.Latha: If this bureau is able to put in a lot of independent directors, you are confident that it will make a difference to the way banks are run?A: It will make [a difference]. For example you place an IT expert, you place a legal expert, you place a Human Resource (HR) expert - these are the things the banks want these days. It is not mundane kind of directors who come and attend the board meeting. I for one would voice for and demand for senior professionals because that is what is required. You have whole lot of IT but it is a kind of routine thing. What new things can come on the table and you have a HR expert coming in.The HR has to go miles. I would not call it management. I call it maintenance because you are in a very different situation now - (1) the new wave of, the genre of banks coming in, will see talent migration. So how are you going to nurture talent or how you are going to retain talent? It is not only acquisition. The next two steps are even more important. Therefore, when an HR expert sits on the board, he is going to give you. I go by professional expertise on board, not the number or the heads.Latha: You were in Bank of Baroda few years ago. How would the bank accept two private sector honchos?A: It is an experiment. From a routine there is a kind of a disturbance happening but let us see if the disturbance is for good. Nobody has said it is successful or not successful. Time will tell - maybe it is kind of an experiment and we have to wait and see. Sonia: One of the key disappointments of the Indradhanush programme was that there was not too much emphasis on how to tackle the NPA situation. There was no stress given on the state Discom issue, the power sector issues. You mentioned that you would come out with innovative ways to tackle the NPA system?A: I said we need to think.Sonia: So what in your mind could be those ways?A: It has two parts. One, the governmental intervention or wherever they can. It is not that everywhere in a corporate, they can do that maybe as discom -- the power minister had a dialogue with Haryana Chief Minister and Rajasthan Chief Minister. You cannot on a perennial basis fund Discoms. Why discoms failed because they failed to revise the tariffs -- they have to be professionalised. You may have corporatisation of discoms. At the end of the day who sits there is what matters. It has got to be professionalised and the tariff revision happens, the pass-through happens; there are no concessions at the time of elections like farmer waiver, electricity bills and all those kind of things happening. Actually they also need serious reform process and tariff revision has to be top on their agenda.Latha: We have to wait for state government to be able to enforce that...A: I have a different worry because we are all funding the private generation companies of various kinds and the power is bought but they do not pay them back. I think even the private generating companies also coming into the bigger stress. The second part I was answering to Sonia is that more of it has to come -- the banks have to think because each one has different thing. Latha: The public sector banks had a giant advantage in terms of accessing deposits. Their reach is several folds what the private sector banks are but look at the current and savings accounts of HDFC Bank, ICICI Bank. Just about everyone has set themselves low cost targets and they have won it. Most of the public sector banks barring State Bank and maybe to some extent PNB have lost their deposit taking advantage. They have all relied on bulk deposits. This was a sitting duck of an advantage they had; they had a huge branch network. How that was lost and how will that regained?A: I would say for example in Punjab National Bank, a point in time when I was an Executive Director, we had about mammoth volume of bulk deposits to the extent of almost Rs 80,000 crore sitting on the books. Today it is just 1 percent of the total deposit. Latha: How did they lose it in the first place? When you have 10-20 times more branches than a private sector bank and HDFC Bank in terms of branch is hardly comparable. 50 percent current account savings account all the time. How did you lose it?A: I will tell you why it is. Because in public sector bank -- I may sound harsh -- we do not have the culture of sales and service. I am very candid on that.Latha: Can that be changed?A: That is what needs to be changed. Every public sector bank has to transform itself. It's a transformation process where they need to change and become a sales and service organisation. People were all sitting in sellers market. So still the mindset of sellers market has to be totally rehashed and you have to feel that you are a part of the buyers' market.The sales and service culture has got to be inculcated - that is a challenge; there is a real challenge in public sector banks because that would only get you CASA, for example PNB has got 7,000 branches and about 8,500 automated teller machines (ATMs) but how the challenge is - that's what in my address I said that we need to become a smart bank with sales and service culture and that would be the transformation that we need to undertake. Sonia: You made two interesting points for the power space where you said Discoms need to be professionalised and tariff revision needs to be on top of the agenda. The other space that has been hit very hard was the metals or the steel sector and the exposure that banks have is immense to this sector. What do you think could be done for this pocket?A: Here some government intervention will be certainly required in terms of anti dumping duties and hiking the import tariffs. Certainly there is a role for the government. What there has been done is little; I would say it\\'s too little, 2.5 percent was announced and it\\'s too little for this and here I can the government can support by creating a barricade for imports of cheaper steel etc, that\\'s the major sector - that\\'s one part of it. Otherwise it looks it will take time to revise. Latha: What is the sense you are getting even FY16 is a washout as far as NPLs are concerned in the second half as well. We are going to have few more NPLs than we had in the first half?A: Banking is one where you cannot live without NPLs.Latha: I am asking you the trend. Is it at least reversing or are we going to keep rising at a fast pace?A: It depends on how the economy is going to move. Generally we hear those cliché words that green shoots are up and people say they are seeing it here and there. However, whether more shoots will give place will tell that - again I would say when you take the percentages, it is denominated effect. If your credit growth picks up then possibly that will be in terms of percentages that they look at, the denominator could help, but that is a mathematical way of looking at it, but the real reduction has to happen. As I took over at the PNB, what I could see was that after eight quarters there has been 8 bps reduction in gross NPAs and 1 bps reduction in -- I said if the trend continues we can be moving. I won't say the clouds are over. There is a small streak. So with all these things there is some light or some hope; hope is a great companion but we need to see how we journey through.