Mr S. Sridhar, Chairman and Managing Director, Central Bank of India, brings his successful stint at the helm of the bank to a close on May 31, capping a well-rounded career that has an impressive list of achievements.

In his stint as Chairman and Managing Director of the National Housing Bank (for a while, he held dual charge) he played a significant role in introducing the residential price index as well as pushing the reverse mortgage product for senior citizens. Prior to this he was associated with Exim Bank as Executive Director as well as State Bank of India in the early part of his career.

Colleagues say he has made a difference at Central Bank, bringing in dynamism with his hard work and speedy decision-making. “We need to tell the client, a quick ‘yes' or ‘no',” has been his motto. They marvel at the long hours he puts in and the punishing schedule he has maintained over the past few years without letting the strain show.

He has played a major part in modernising Central Bank's technology infrastructure and its HR policies. A whole gamut of measures, including accelerated promotions, regular appraisals, fresh recruitments, talent mapping, etc., were unveiled during the last two years.

He has also done some organisational restructuring, bringing in the concept of verticals for different sectors into operation where none existed earlier. Even union heads who are normally hard to please, praise the work he has done over the past few years to transform the bank.

We ask him what he plans to do after retirement. He says he'll take a holiday. Sure, he needs and deserves one. He is not saying what he'll do after that. Somehow, he doesn't seem the type to fade quietly into retirement. If the reward for good work is more work, then surely Mr Sridhar will probably have to get ready for another assignment after his holiday.

Edited excerpts from the interview with the CMD:

What were your main achievements at Central Bank?

There are two or three things that we have done that are very important. We achieved 100 per cent completion of CBS (core banking solutions). When I took over our CBS completion was only 30 per cent. In a period of 19 months we achieved full completion.

Central Bank has had a number of legacy issues — but technology was not one of its strengths. The technology mission started about five years ago was not making much progress. So, the technological up-gradation had to be driven, and I have done that.

In parallel, there have been a lot of tech-led business initiatives and these will continue in future as well. I am proud to say that technologically, we are on a par with the best of public and private sector banks. We are still not offering the type of products that we can with this platform. That is probably a function of our lack of customer outreach. That has to happen in future.

An example of the technology platform being used is our financial inclusion programme, which is entirely led by ICT (Information, Communication and Technology). Against a target of 1,766 villages (with people below 2,000 population), we have reached out to more than that number and are well on our way to reaching the target of 3,976 villages to be achieved by March 2012.

Even before Budget 2010 mentioned the financial inclusion target, we had begun our work on this programme on our own. Financial inclusion is part of the DNA of the bank. Two-thirds of our branches are in rural and semi-urban areas and we have a very strong presence in the so-called ‘BIMARU' (Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh) States as well as in Chhattisgarh and Jharkand. We call them priority States because we think they will be the frontrunners of the future.

Notwithstanding our legacy issues and an ageing workforce, I can say that if the bank is given a clear strategy and direction, then it performs.

We have introduced all products, including net banking, SMS alerts, and so on. On ATMs, we were at about 400 when I took over. As we speak now, it is about 1,100. We have already placed orders for another 1,000 ATMs and work is going on for placing orders for another 1,500 ATMs.

I am confident that by March 2012, we'll have as many ATMs as our branch strength. This I would regard as another major achievement.

Thirdly, I think I have been successful in lifting the image and visibility of the bank. Otherwise, you know, it was not in the news. The best accolade came from the Banker magazine, UK which rates the top 500 banks on brand valuation.

We were at about 470 earlier and have moved up about 91 places during the last one year — which is the highest movement upwards among all Indian banks and among the top movements in the world.

In absolute terms we are still far behind, but the improvement is there. It is a reflection of the efforts we made to project the bank and build on the foundation that the bank had. I have tried to tell this story in my own way. The external recognition also served the purpose of being a good internal channel for communication.

That's because in such a large bank, I can't be talking to everybody. These awards have brought them pride — recognition that their efforts have paid off and this has helped us implement a number of decisions later. These have been the intangible gains.

What were the tangible gains?

If you look at tangible gains, then the bank's return to profitability more or less in line with its peer group is a good achievement. I won't say that we are there exactly. To give you an example, the bank's net profit never crossed Rs 600 crore except once in its history. It would usually be around Rs 500 crore. After taking over, in the first half of 2009-10 itself, our net profits crossed Rs 581 crore, while for the full year it touched Rs 1,058 crore, which was a 85 per cent growth over the previous year.

This year (2010-11), we have touched Rs 1,252 crore — an increase of 20 per cent. But this is after providing for a massive increase in pension liabilities consequent to giving retirees a second option as a one-time measure (as part of the industry-wide wage settlement).

There was a one-time hit of Rs 570 crore which represented pension liabilities of retired employees who missed it earlier. For serving employees, the RBI permitted us to amortise the expense over five years — which was about Rs 240 crore every year.

Now, hypothetically, if this had not been there, profits might have grown by 85 per cent year-on-year and touched about Rs 2,000 crore. Our net interest margin last year was consistently at about 3.4 per cent quarter after quarter. Now I am confident that it will be in this range.

In 2010-11, our net interest income grew by 109 per cent, which came on the back of over 60 per cent growth in the previous year.

How did you achieve this?

We achieved it through a significant reduction in cost of deposit. Right from the time I took over, we decided not to take any high-cost bulk deposit, even though it would mean lower growth. As it turned out, we had good growth too. Our advances grew about 25 per cent in 2009-10 and about 16.5 per cent last year.

Our deposits growth was slightly muted last year. In the past, 35-40 per cent of the deposits were bulk deposits. These came from big corporates and public sector undertakings that negotiated and drove a hard bargain and parked money for short periods and, at times, for long periods too. As and when they matured we decided to stop renewing it.

Our relentless focus on building CASA has helped. I won't say I am fully satisfied. Our CASA is 35 per cent today, grown four percentage points in two years. This has dramatically impacted our borrowing costs which were at about 5.71 per cent last year compared with about 6.81 per cent two years ago.

Overall our balance-sheet grew. We had to compensate for the lack of bulk deposits through Certificate of Deposits (CD) in 2009-10. At that time, CD rates were low. This year we were not so lucky. CD rates also went up. But we were able to raise our requirements in the first half at a lower cost.

Secondly, we re-priced our loans. Since Central Bank has had a large corporate clientele which always extracted large concessions through fine rates, we addressed that in two ways.

We had to be more balanced about our business mix. We could not remain so dependent on wholesale business. We had to bring back our SME and retail customers. In agriculture we were always strong and had a contribution of nearly 20 per cent because of our rural network.

We were able to bring down the share of corporate credit to total credit. It is still work-in-progress. Whenever we could take advantage of reset clauses, we did. We were greatly helped by the RBI diktat in July 2010, that you couldn't lend below base rate.

Till then we were under pressure to lend to big corporates at very fine rates of 6-6.5 per cent — often below cost of funds. It didn't make sense. I said that it's okay to lose some business in such cases. We decided to shift our focus to mid-sized corporates (turnover of Rs 10-500 crore).

This helped increase our yield on advances to 10.3 per cent, while incrementally it was nearly 11 per cent. Two years ago, the yield on advances was at less than 9 per cent. A combination of these steps has helped our net interest margin go up.

What innovations did you bring in?

I brought in a few innovative measures, if you can call them that. For instance, the concept of verticals. Central Bank till then was following the time-tested control and command structure — with a hierarchy of branch, region and zone leading up to the central office where papers would go back and forth. That has changed. We now have separate verticals for large corporate loans, mid-corporate and SME and asset recovery.

How did this help?

We were able to reduce our turnaround time. It came down to less than a month for large corporate loans. In some cases we have been able to respond within seven days. Earlier it used to take three months. We have been able to get back a number of old clients because of this.

What were the main HR initiatives that you took?

This is where I spent the maximum amount of my time. Central Bank has had a multi-union environment. I must put on record that I have received the highest cooperation from them. I think I got this because I could convince them that there was no personal agenda. We have tried to proactively address the needs of the staff and tell them that if they look after the bank, the bank will look after them. After all we are one family.

One of the things I did was to bring in the highest number of promotions in Central Bank's history. In the last two years alone, there were about 5,000 promotions across all levels — that's probably a level that was not seen even if you put the promotions in the last 10 years together. We needed to stop people stagnating.

Promotions were earlier done as an ad hoc exercise. Now we have a calendar for appraisals which every one has to follow. You can change the number of promotions based on the need and vacancies, but you still have to go through with the appraisal exercise.

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