'Turn Around is no magic; investors go by fundamentals and not propaganda'

THE fact remains. The truth is undeniable. Once rated as one of the worst  performers, rated as a non-performing asset of the Indian banking industry destined to die, has retrieved the lost ground. Mr. Vaddarse Prabhankar Shetty and his team have made it. The sharp-edge, tight-rope-walking powered by officer-employee all out cooperation made all the differences to this nationalized bank. UCO Bank again has its feet on the ground and holds its head high. After squaring off Rs 1665-crore accumulated loss, it went for diluting its equity through public offering. The response was huge. Without debating or going into the logic or fundamentals of privatization move, Indian banking industry may today look at UCO Bank the other way round: it's worth buying. "Some external factors coupled with the inherent strength of the bank" have helped the Bank turn around, so feels Mr. S. Roychowdhury, member on the Bank's Board of Directors. In an interview with Amitabha Sen he said "the present chairman of the Bank has effectively contributed and led to the turn around by fostering the creative elements and maintaining industrial harmony."  One of the most redeeming features of revived UCO Bank today is investors' confidence. "The investing public now believes that the Turn Around is no magic which will vanish in thin air as soon as the magician spell is over. Investors have gone by the fundamentals rather than propaganda", Mr. Roychowdhury said.

AS. UCO Bank which had been identified few years back as one of the three “weak’ nationalized banks in the country,  has got rid of that stigma. A bank which has been for years together performing so badly as to result in staggering loss, what is the magic that helped the bank not only to recover but to be back in the black? What are the main reasons that acted as a prime mover to take the bank to the existing position? Do you find perceptible change in management functioning under the incumbent chairman from that of the past?

SR. The turn around has been made possible due to some external factors coupled with the inherent strength of the bank. Interest rate has moved southward without any major change in the lending rate. The spread available has contributed to the profitability. There has been no major industrial unrest and the industrial relations climate remained conducive to growth. The VRS resulted substantial reduction in the wage bill. All credit to the officers and employees who shouldered additional responsibility and workload caused by VRS. As far as management of the Bank is concerned, it may kindly be noted that all the erstwhile 'weak' banks have made a turn around possible. However, the present chairman of the Bank has effectively contributed and led to the turn around by fostering the creative elements and maintaining industrial harmony.

AS. Does the IPO that the bank floated recently and was overwhelmingly subscribed, testifies the fact that the bank’s shock absorbing capacity or power of resilience to withstand even occasional uncertainties has improved remarkably? Would you like to attribute this phenomenal development to restructuring of the bank including VRS?

SR. In a way 'yes'. The investing public now believes that the Turn Around is no magic which will vanish in thin air as soon as the magician spell is over. Investors have gone by the fundamentals rather than propaganda.

AS. You have seen both the worst and the better days of UCO Bank in different capacities including your present position as Officer Director of the bank. To what extent you would like to hold the management policy as a whole including financial management responsible for such a turn around?

SR. I have not noticed any fundamental change in the management policy. However, I am happy that the management now understands that industrial harmony is key to success.

  1999-2000 2000-01 2001-02 2002-03
Global Deposits 18360 21536 26849 31343
Domestic Deposits  16925 20006 25224 29741
Global Advances 8597 10701 13402 16583
Domestic Advances 7503 9512 12298 15405
Global Investments 9939 10882 12343 14179
Domestic Investments 9572 10424 11845 13480
Total Income  2227 2573 3125 3402
Total Expenditure 2050 2359 2649 2778
Operating Profit/(Loss) 177 214 476 624
Net Profit/(Loss) 37 33 165 207

AS. Indian banks today are flush with funds but on the other hand many a good bank still are following conservative credit policy, seeking more secured field of investments, though risk taking and risk management are the determinant factors for a bank to rise or fall. Do you think a more liberalized credit policy and greater freedom for the decision makers may result in more and more credit deployment in various sectors of the economy? How would like to rank UCO Bank in this respect?

SR. Credit dispensation has been low not only in UCO Bank but in the banking industry as a whole. Industrial credit off take has been low due to slow industrial recovery. Most of the banks are now trying to penetrate the mid market segment, housing finance and consumer credit.

AS. In last few years a number of private banks have come up in the country. More significantly, many foreign banks are showing greater interest in Indian banks. The government is toying with the idea of allowing private equity holding up to 76 percent in Indian private banks. How do you look at this changing scenario as a nationalized bank director?

SR. The new private banks have contributed in a big way in bringing in attitudinal change in the nationalised banks. Faced with the competition these banks, the leviathans in the nationalized sector had to run for upgradation of technology and modification of outlook.

AS. In coming years foreign banks or foreign banks-dominated commercial banks are going to play a crucial role in shaping up Indian economy. They are likely to be guided more by commercial considerations than social commitment. On the other hand, nationalized banks are largely guided by social commitment even today. Is there any meeting point for these two sectors of banking so that in national perspective, both of them can be complimentary to each other in shaping up Indian economy in future?

SR. The same prudential norms having been implemented, the nationalized banks are as much profit oriented as their private sector counter parts. There is nothing called "complimentary competition".

AS. You have spent decades together and is closely associated with bank officers’ movement and represent the officers community in UCO Bank Board of Directors. In the changing scenario, what would be your message to the officers community to compliment management efforts to strengthen it further?

SR. In banks executives grow from amongst the employees only. If officers are well groomed, there will be no conflict with the management effort. On my life I have believed in industrial harmony and peace. But sometimes, even for bringing about lasting peace one may have to take up arms. I think, in coming days the management will demand for more from its employees. There is nothing wrong in it but the management should also make all possible efforts to equip the present employees with new technology through training and development and be positive towards compensation similar to its peers.

November 28, 2003

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