UBI is You Bet, I can turn around a bank

‘‘It was a bit impetuous,’’ admits Madhukar. But with a commitment made, he had to live up to it. Besides, why else had he left a high-profile career at the SBI, if it wasn’t to turn the Calcutta-headquartered UBI around?

What followed was a three-day brainstorming session, from August 3 to 5 last year (the 5th was a Sunday, a day that no one in Calcutta works), with around 100 top managers from all over the country.

‘‘Are you man enough to stand next to me and fight…if you can, let’s go ahead. If not, you can ask for a transfer, and it will be given,’’ he recalls saying. Having said that, he slipped his regional chiefs a Memorandum of Understanding— between him and them — asking them not to see it now, ‘‘as it is quite late already,’’ but to think about it later.

Still not certain he’d got away with it — the MoUs contained steep hikes in profit targets — Madhukar realised he’d turned the corner when, one of the regional chiefs peeped at the MoU, and said he’d like photographers around when he signed the MoU.

For north India, Bhattacharya recalls, he was asked to improve his 2001-02 profits by more than three times, from the original target of Rs 11 crore to Rs 36 crore. In turn, Madhukar promised to eliminate all delays in clearing loans from Head Office, and dramatically increased the powers of regional chiefs.

This year, Bhattacharya turned in a profit of Rs 50 crore, as against a loss of Rs 9 crore in 2000-01. And, today, he, in turn, is signing MoUs with his branch managers.

In almost every parameter, UBI’s turnaround is incredible. Last year, though it declared a net profit of Rs 19 crore, this did not take into account Rs 281 crore of expenses, such as arrears and provisions for gratuity/pension funds.

On a like-to-like basis, from a loss of Rs 173 crore in 2000-01, UBI posted a net profit of Rs 119 crore in 2001-02. Even if you remove trading profits out of investments (bonds held by all banks appreciated sharply thanks to the cut in interest rates last year) of Rs 281 crore, UBI’s operating profits from core banking rose by over Rs 300 crore.

And, at 12.02, UBI’s capital adequacy ratio is today one of the healthiest in India’s banking sector.

UBI’s turnaround story, in retrospect, is frighteningly simple. Why are we aggressively trying to hike deposits, even paying depositors a huge premia over the prevailing rate, Madhukar asked his team, when we can’t lend this money out at a higher rate?

So, to begin with, let’s cut down on the high-interest deposits. Over the year, around Rs 1,000 crore of high-cost term deposits that came up for renewal, were not renewed.

UBI also came up with innovative new products to help increase its loans. If, for instance, a borrower was sanctioned a personal loan of Rs 50,000 at a 12 percent interest rate, he could have the amount doubled, and the interest rate cut by half a percentage point, if his wife was also a co-borrower.

‘‘The world over,’’ says Bhattacharya, ‘‘women are better at repayments.’’ Adds Madhukar, ‘‘It also doubled my employee productivity immediately.’’

How? Well, if you cleared loans of Rs 5 lakh per day earlier, you would automatically clear loans of Rs 10 lakh now. UBI never did ‘‘bill discounting’’ earlier, suddenly Delhi alone was doing Rs 450 crore.UBI, says Madhukar, will wipe out the accumulated losses over the next two to three years. U Bank on It.