Most of the restructuring done: South Indian Bank MD
Murali Ramakrishan, who was previously at ICICI Bank as Senior Managing Director, was appointed Managing Director and CEO by the Board in October 2020 to turnaround the 93-year-old South Indian Bank, headquartered in Thrissur . In an interview with TOI, Ramakrishan talks about his plans.
You joined the bank in the middle of the pandemic. Was there a specific mandate for you as CEO?
The discussion was more about how I see the bank and how it can be managed differently and solutions to various problems. SIB is the largest among the smaller banks and it has a branch-centric structure like that of a public sector bank. It was a great experience articulating how you want to restructure the whole bank in terms of assets and liabilities and putting the different pieces in place so that they form a solid foundation.
To what extent has the restructuring been carried out?
I would say it’s almost over now. Previously, branch managers fought everything that happened in the branch and therefore they did not have much time for business. Today, the role is split between a branch manager who takes care of the business and takes care of the customers and an operations manager responsible for operations. The branch distribution structure focuses primarily on deposits and some branch-managed activities such as agricultural and gold lending. We have separate lines of business that are clearly focused on what they need to deliver and their focus is not just credit, but how much cross-sell they can do. In addition to this, I engaged data science division for 68 lakh customer analysis so that we can transform the existing book to come up with pre-approved offers. We have a director of marketing and a director of credit and we eliminated them.
Experts say banking IT systems need an overhaul for the digital world
Over the past four years, this bank has invested Rs 150-Rs 180 crores in technology. We opted for a new retail platform from Nucleus. We are also opting for a new SME platform for the integration of all SME customers. We have new systems for collection, treasury and customer relationship management. There is a clearly articulated strategy for cloud adoption that we presented to our board of directors. The two main issues are that there should be no compromise in client secrecy and there should be no vulnerability to outside attacks.
One of the problems with the bank is the quality of assets. How is this resolved?
To improve the quality of assets, we have completely redesigned collection and recovery. For loans to individuals, we have opted for outsourcing as do the big banks. For SME and business customers, the recovery is carried out by the employees. In FY22 we had about Rs 850 crore upgrades and recovery till December 2021. We are expecting Rs 1200 crore upgrades by March 2022. We also sold loans to asset reconstruction companies and I monitor special mention accounts weekly. My goal is to bring net non-performing assets down to less than 2% first, and then to less than 1%. We currently have excess funds which allow us to offer short term loans to AAA and AA companies.
Given your growth plans, how soon would you need to raise capital?
I’m not desperate for capital because the bank’s capital adequacy is about 15.7%. Unless we see the market offering a huge opportunity for full-throttle growth, we’ll likely opt for more capital. I have already secured board approval to raise around Rs 2000 crore in equity. And initially, I am looking to raise around Rs 500 crore. But I’ll time it appropriately because today, with a lot of short-term money going to IPOs, our story will need to be a little more compelling for people to take a mid-term perspective. I will therefore target institutional investors who have a medium-term horizon. I would be happy to do it in the next three to six months.
You joined the bank in the middle of the pandemic. Was there a specific mandate for you as CEO?
The discussion was more about how I see the bank and how it can be managed differently and solutions to various problems. SIB is the largest among the smaller banks and it has a branch-centric structure like that of a public sector bank. It was a great experience articulating how you want to restructure the whole bank in terms of assets and liabilities and putting the different pieces in place so that they form a solid foundation.
To what extent has the restructuring been carried out?
I would say it’s almost over now. Previously, branch managers fought everything that happened in the branch and therefore they did not have much time for business. Today, the role is split between a branch manager who takes care of the business and takes care of the customers and an operations manager responsible for operations. The branch distribution structure focuses primarily on deposits and some branch-managed activities such as agricultural and gold lending. We have separate lines of business that are clearly focused on what they need to deliver and their focus is not just credit, but how much cross-sell they can do. In addition to this, I engaged data science division for 68 lakh customer analysis so that we can transform the existing book to come up with pre-approved offers. We have a director of marketing and a director of credit and we eliminated them.
Experts say banking IT systems need an overhaul for the digital world
Over the past four years, this bank has invested Rs 150-Rs 180 crores in technology. We opted for a new retail platform from Nucleus. We are also opting for a new SME platform for the integration of all SME customers. We have new systems for collection, treasury and customer relationship management. There is a clearly articulated strategy for cloud adoption that we presented to our board of directors. The two main issues are that there should be no compromise in client secrecy and there should be no vulnerability to outside attacks.
One of the problems with the bank is the quality of assets. How is this resolved?
To improve the quality of assets, we have completely redesigned collection and recovery. For loans to individuals, we have opted for outsourcing as do the big banks. For SME and business customers, the recovery is carried out by the employees. In FY22 we had about Rs 850 crore upgrades and recovery till December 2021. We are expecting Rs 1200 crore upgrades by March 2022. We also sold loans to asset reconstruction companies and I monitor special mention accounts weekly. My goal is to bring net non-performing assets down to less than 2% first, and then to less than 1%. We currently have excess funds which allow us to offer short term loans to AAA and AA companies.
Given your growth plans, how soon would you need to raise capital?
I’m not desperate for capital because the bank’s capital adequacy is about 15.7%. Unless we see the market offering a huge opportunity for full-throttle growth, we’ll likely opt for more capital. I have already secured board approval to raise around Rs 2000 crore in equity. And initially, I am looking to raise around Rs 500 crore. But I’ll time it appropriately because today, with a lot of short-term money going to IPOs, our story will need to be a little more compelling for people to take a mid-term perspective. I will therefore target institutional investors who have a medium-term horizon. I would be happy to do it in the next three to six months.