7 things SBI's Arundhati Bhattacharya will be remembered for

Is the SBI chairman leaving the bank in a stronger and better position than what it was? Abhijit Lele finds out.

State Bank of India (SBI) Chairman Arundhati Bhattacharya's four-year term, which will end on October 6, has been eventful. Her tenure also coincided with rising bad loans of the banking sector, and the subsequent fire-fighting that is going on the resolution front.

Besides that, she prepared the ground for the merger of its associate banks with itself which was completed earlier this year.

Bhattacharya was also focused on making the banking behemoth more relevant to the changing business environment, customer needs or employee expectations -- making the bank digitally savvy, cordial relations with the regulator and making the organisation employee-friendly, especially for women.

Her operational skills were also tested during the demonetisation period, as all banks, including SBI, had to manage the exchange and deposits of scrapped notes. However, the bank's margins and asset quality came under pressure as the demand for loans reduced significantly along with rising provisions for bad loans.

1. The merger

Though already the largest bank in the country, the merger of five associate banks and Bharatiya Mahila Bank with consolidated asset base of over Rs 33 lakh crore, has given the SBI more firepower and scale to compete on global arena.

The bank's merger with six other entities has taken it into the league of top 50 banks globally in terms of assets.

For Bhattacharya, who got a one-year extension last October, the merger was the key task during the past year, which she delivered, said a senior public sector banker.

The bank had done a lot of groundwork prior to the merger, especially in 2016-17 in terms of cleaning up the corporate loan book of associates, integration of information technology systems, and bringing senior management on the same page to ensure smooth transition.

The merger has resulted in strain on the bank's financials with a rise in slippages in the retail loan book and slow growth in home loans. But, these are one-off events, said an analyst with a domestic brokerage firm.

2. Relations with regulator and government

A former top SBI executive said the relationship of the head of the largest bank with the regulator Reserve Bank of India (RBI) is crucial.

Unlike her two predecessors, who had run-ins especially with the regulator, Bhattacharya developed good working relationship both with the RBI and the finance ministry.

The central bank takes her opinion and insights seriously, said an executive at the Indian Banks' Association.

3. Capital position

In June, the SBI raised equity capital of Rs 15,000 crore through a qualified institutional placement route, the first such fund-raising after the merger, at Rs 287.25 per share.

As a result, its capital adequacy ratio stood at 13.3 per cent at end of June 2017 for combined entity, compared with 13.1 per cent for the standalone bank in the March 2017 quarter.

4. Asset quality

Bhattacharya in her first two years brought down gross non-performing assets (NPAs) as a percentage of total advances from 5.6 per cent in September 2013 quarter to 4.2 per cent in the September 2015 quarter. However, after the central bank's asset quality review, applicable from December 2015 quarter, gross NPAs have gone up.

The June 2017 quarter showed the impact of poor asset quality in associate banks as gross NPAs touched 10 per cent.

While working to stabilise the asset quality of the bank, Bhattacharya was vocal about taking action against recalcitrant managements and promoters of defaulting companies. But, banks were hamstrung without legal recourse to kick existing managements out. The SBI was no exception to it.

With the Insolvency and Bankruptcy Code giving creditors more rights, Bhattacharya has been instrumental in driving hard bargains in many NPA cases.

In an otherwise steady journey of improvement in asset quality, a merger induced bump up in gross bad loans has queered the pitch.

She was equally vocal about pointing to adverse effect of farm debt waivers on credit discipline. She did find strong support on her view on farm loan waivers from former RBI governor Raghuram Rajan when he was the central bank governor.

5. Financials

The bank's financials improved in Bhattacharya's two years with the net profit rising from Rs 2,375 crore in the September 2013 quarter to Rs 3.879 crore in the September 2015 quarter. However, after the RBI's asset quality review from the December 2015 quarter, the SBI's financials began deteriorating.

The SBI's net interest margins, which were in the range of 3-3.2 per cent fell to 2.8 per cent between June 2016 and March 2017, and fell further to 2.4 per cent in the June 2017 quarter after the merger with associate banks.

6. Digital banking

The leader in physical banking was lagging behind private sector banks in the digital space when Bhattacharya took over as chairman.

The bank's digital offerings both increased and improved as it quickly launched products from e-wallet SBI Buddy to digital branches, and mobile website and apps for all types of customers.

As a step to support the fintech ecosystem, the bank created a Rs 200-crore fund to invest in fintech start-ups. Many solutions and services are expected to emerge from this fund to give an edge to the bank for the future.

7. People focus

Bhattacharya's people skills are something even her competitors admire. For the merger, she had to bring employees on board, and convinced them patiently to accept it.

She let senior colleagues -- managing directors -- work independently, which is seen a major plus.

She has also been sensitive to employees' concerns and has addressed them effectively.

She allowed women employees to work from home if they were caregivers to an ailing parent or if a child had an important exam to take.