Before the midnight hour

The second piece of good news is that the search is on for a chairman of the State Bank of India who too shall have two years to go before he retires. It has just suffered four chairmen in five years! I believe the ideal laid down by the Reserve Bank calls for three-year tenures, but let that pass. Because it is now time for the bad news.

The Industrial Development Bank of India may not be as familiar a name as the State Bank of India and the Life Insurance Corporation, but it is still one of India8217;s premier financial institutions. Its annual sanctions went from Rs 54 crore in 1964-1965 its first year of operation to Rs 28,000 crore in 1999-2000. Over the same period, its yearly disbursements rose from Rs 28 crore to Rs 17,000 crore in the last financial year. Its total assets have risen from Rs 70 crore to Rs 70,000 crore. I could go on, but I think we can all appreciate that this is not an institution to be treated frivolously.

And this, which should come as no surprise, is precisely how the Indian bureaucracy in its eternal wisdom is handling it. Times have changed since the Industrial Development Bank of India was created. It has lost its tax-free status as well as its access to easy funds from the Government of India and/or the Reserve Bank. It is now required to raise money at market-determined costs. At the same time, new players have entered the field of project financing which was not the case in its glory years.

Squeezed from all sides, the Industrial Development Bank of India has seen its profit margins dropping steadily. In the fiscal year 1997-1998 it posted a net profit of Rs 1,501 crore. There was a sharp decline in 1998-1999 when the net profit was Rs 1,259 crore. In 1999-2000 this figure fell even further, no more than Rs 947 crore. I believe that this declining trend shall continue into this financial year as well. But that does not mean that the Industrial Development Bank of India is a dinosaur doomed to extinction. Given proper leadership, there is no reason why it should not regain some of its former glory.

I think the key word in that last sentence is given8217;. The Industrial Development Bank of India cannot just throw up a chairman from its own ranks of its own volition. A leader has to be appointed by due process, and this is where the bureaucracy enters.

The current chairman of the Industrial Development Bank of India will, assuming he does not get an extension, retire in January 2001. His deputy will retire a few months later, in April. Who, then, will be the new chief of the organisation, someone who can lead it to face new challenges?

There is no point in asking, since nobody appears to have an answer. I am not even sure if the process of selection has begun, or if this will turn out to be another midnight miracle with the lucky man getting the nod at the very last minute. Or, perhaps, this will be a repeat of the Life Insurance Corporation experience where the process shall be conducted in the three months between January and April of 2001? If you ask me, the last option is probably the closest to the truth.

What message is this dithering giving to the officers in the Industrial Development Bank of India? Does it give them any confidence that the bureaucracy takes them even remotely seriously? Once upon a time, officers in this, and other such institutions, might have had no choice other than to soldier on. This is no longer true. Several executives have secured berths in the World Bank, the International Monetary Fund, or the Asian Development Bank. Other alumni8217; have moved to the Unit Trust of India, the NSE, and other such institutions. The Industrial Development Bank of India still has a pool of talented officers, but the ground-water reserves are being depleted.

There is, of course, no market-related compensation package that will attract talent at junior levels. Why am I not surprised? At this rate, the Industrial Development Bank of India will be nothing more than a springboard for ambitious young men and women. Working for the Industrial Development Bank of India will be a resume-filler rather than a serious career option.

It may be that somebody in the civil service shall wake up and realise that this is no way to treat a premier financial organisation. Perhaps a new chief shall be appointed well before the old one retires. I am sorry, but this will be a classic case of treating the symptoms rather than the disease.

What is required is a proper succession policy, not just for the Industrial Development Bank of India but for a whole bunch of other organisations. Nobody would dream of treating the three wings of the military in this lackadaisical manner. So why are financial institutions being given the Cinderella treatment?

Come to think of it, there was a good deal of robust common sense in those old nursery tales. But just in case they have forgotten, this might be the time to remind the bureaucracy of the Fairy Godmother8217;s famous warning to Cinderella: quot;Do not wait until the midnight hour!quot;

Once upon a time, officers in IDBI and other such institutions might have had no choice other than to soldier on. This is no longer true