New Delhi: Chairman of SBI (State Bank of India), Pratip Chaudhuri after getting the coveted seat of the nation's largest lender, thought that problems would perhaps be fewer than what he faces right now. His predecessor, OP Bhatt was known for its bold moves sometimes, which Chaudhuri acknowledges, but it left the nation's largest lender with questions to answer with no immidiate solutions at hand. From the large pension liability to the home loan business going down, the man had to tackle some of tough problems at hand. During an interview to Rediff, he discussed some of them, which is listed as follows:
- Rs 10,000 crore in pension liabilities
Even though OP Bhatt tackaled most issues very shrewdly, there were some financial liabilities which were going to hurt the financial propects of the bank. After Chaudhuri becoming the chief of SBI, he was faced with a Rs 10,000 crore bill for pensions of its former employees, which had been accumilated over a period of 5 years. If the expenses were to be taken out of the Profit & Loss account, the bank could be loss making institution for the first time since it began its operations. What surprised Chaudhuri was, why were these issues not tackled head on, and brushed under the carpet, but it seems he is in control now. However, the Rs 4,000 crore infusion of capital by the government will certainly, as revealed by the CFO today.
- Tackling the problems with the loan department
A majority of the business SBI does on an all India basis, is the through the loan department especially to the small scale and medium scale enterprises. Due to the previous management, who had done away with zonal managers, a lot of the business actually went out to the other private players in the country, making SBI weak from within. The organizational rejig was vital and be bought back the zonal managers, on advice of McKinsey. The junior managers, much more in number, were too many in number to be handled by the General Managers. The result was the number of disbursals of loans going up from 400 to 1,700 a day, at some of the bigger branches.
- Balancing the CRR and the high interest rates of SME loans
The CRR for the majority of the time, was at a high level, which meant that SBI had to charge it some proportion from its existing customers. But then, the SME component started getting hurt with the 14 to 17% interest rate on most loans. Chaudhuri even said, "We almost became a dinosaur", trying to explain how SBI was eating up into the suppliers' businesses. Hopefully, this liason with the RBI and its prompt action on that front revived the SME loans business to a large extent. Also the lessening of the CRR gradually has helped the cause, allowing him to put down the interest rates on SME loans.