October 4, 2017 / 5:00 AM / a year ago

Breakingviews - India will miss its top banking chief

MUMBAI (Reuters Breakingviews) - Arundhati Bhattacharya broke the mould for India’s banks. Bad debts rose and the share price underperformed during her four years running the country’s largest lender. But State Bank of India’s straight-talking, 61-year-old chairwoman ensured it was the best of an ailing bunch of public-sector lenders and was unafraid to face up to errant tycoons.

State Bank of India (SBI) chairwoman Arundhati Bhattacharya is seen in a TV camera's viewfinder as she speaks at a news conference after the announcement of SBI's fourth quarter results, in Kolkata, India, May 19, 2017. REUTERS/Rupak De Chowdhuri

Since September 2013, SBI’s bad loans have risen to nearly 6.0 percent of the total, from 2.9 percent. Net interest margins have shrunk to 2.5 percent from 3.5 percent. And the shares underperformed its largest private-sector rival, HDFC Bank, and the benchmark Nifty 50 index by 150 and 16 percentage points, respectively. Today, SBI barely trades at book value.

But that masks the real achievements of the first woman to run the giant lender. After the regulator forced banks to acknowledge bad loans, Bhattacharya managed the fallout better than state rivals and without irking the government, the bank’s majority owner.

Bhattacharya, who is due to step down this week, earned respect by warning that the days of tycoons gaming the banking system were over – and encouraging New Delhi to pursue liquor baron Vijay Mallya, who was re-arrested in London on Tuesday on new money-laundering charges.

Elsewhere, SBI convinced the government to change the law to allow the transfer of mining licences, enabling deals between distressed players and those in better shape. The $33 billion SBI is one of the few public-sector lenders strong enough to raise capital from the market, instead of relying on New Delhi for a bailout.  

Over the past year, Bhattacharya has also overseen a merger with five associate banks, catapulting SBI into the world’s 50 largest banks by assets. That could pave the way for further consolidation of state lenders, which hold more than two-thirds of assets in the country. Beyond the balance sheet, she turned the stodgy SBI into a digital-savvy institution.

All the while, Bhattacharya has worked for a relative pittance; her salary last year was barely $44,000. Low remuneration is one reason India’s state banks struggle to attract talent. That makes Bhattacharya’s achievements all the more impressive. She sets a high bar for her successor. 


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