OPINION | Vault Matters: Why private banks need more returnees like Shyam Srinivasan, Murali Natarajan and Ashok Vaswani

To improve the banking system, we don’t need more banks.

It was in 2009 and 2010 that two low-key banks suddenly caught everyone’s attention - DCB Bank and Federal Bank. Something unheard of in the Indian banking terrain happened, two Indian origin foreign bankers decided to come back to head relatively lesser known and definitely smaller private banks.

In a lighter vein, the salary at which they came back was considered as the amount of taxes they were used to paying until then.

Cut to 2015, the two banks started figuring in investors’ radar.

Federal Bank, which was always a larger franchisee is now among the top six private banks, and DCB Bank is being considered as a serious mid-sized bank.

Winds of change

It’s equally important to mention that it was around the same time that two other foreign bankers did a ghar-wapsi  - Vishwavir Ahuja and Rajeev Ahuja, and took a leap of faith with a bank, which for a good part of its existence, was known as Ratnakar Bank Limited. Today, the franchisee, RBL Bank, is soon to become a subsidiary of Emirates NDB.

Blackstone, which has never invested in a bank in India, picked up at 10% stake in Federal Bank. Who knows what corporate action awaits DCB Bank.

The reason why Murali Natarajan, Shyam Srinivasan and Ahujas (though not related) will be remembered forever is because they took a conviction call at a crucial juncture of their careers, came back to India and transformed an entity to put it on a wider investment map.

Their ultimate goals are still half done, but their journeys will always be one to remember because they added purpose to the respective banks, put in effort to build a team and, above all, set a template which is ripe for the next phase of growth. More importantly, these are the bankers who have truly ensured that the term ‘old private banks’ has become redundant even from an RBI classification standpoint.

Karur Vysya Bank, Karnataka Bank, South Indian Bank, Dhanlaxmi Bank and to an extent even City Union Bank are examples of a missed opportunity. While one may argue that the regulator getting restrictive on CEO salary structures and so on could have pushed away some good candidates, the fact is headhunters don’t even have a mandate to reach out to some of these global Indian bankers to run a bank in India.

Cultural changes 

This isn’t a good thing. For one, what Shyam and Murali brought into Federal and DCB respectively was the ability to think big, to think technology, to do the right thing for the customer (something is which gets drilled into their DNA when in foreign countries) and yet not lose sight of profitability. Equally important, they brought about a cultural change in their respective organisations which is now responsible for positioning the bank where it is today.

Unfortunately, these change elements are missing in most private banks, with the coveted CEO seat either becoming a ring-around-the-rosy with the existing (and shrinking) talent pool or as mentioned last week, a post-retirement option for PSU bankers.

After a long time, Kotak Mahindra Bank broke the jinx with Ashok Vaswani stepping in as MD & CEO. A foreign banker opted to return to India (though a little after his prime) nearly 15 years after Murali set an example. He is putting in his best efforts to position Kotak Bank as customer-centric and retail-heavy. It is still work in progress and too early to judge. But at least an attempt to overhaul the culture is being made.

To improve the banking system, we don’t need more banks; we need more of these change agents, even if they don’t meet all expectations. Even if its work half done, it is better than no work done and it provides a much better stage for a successor to step in.