Thursday, May 13

BoB will be net job creator, says CEO PS Jayakumar

MUMBAI: The complete integration of Dena Bank and Vijaya Bank with Bank of Baroda (BoB) is expected to take nearly 18 months. But customers will reap the benefits much earlier. BoB will be providing cash deposit and withdrawal facility in all branches by May. In an interview with TOI, BoB MD & CEO
PS Jayakumar speaks of what customers, employees and investors can expect. Excerpts:

What is the timeline for the integration?

The ATM networks have already been merged and customers will not face any charges. The merger of the three treasuries is effective today (April 1). The core banking integration will take 12 to 18 months. This was the time it took us to migrate from Finacle 7 to Finacle 10 (versions of the core banking software) — 12 months for preparation and six months for stabilisation of the platform. But customer experience in terms of consistency in various branches will be achieved much earlier. The first set of interoperable functions will be rolled out in the first week of May. These will include cash deposits, cash withdrawals, fund transfer and obtained statement of account. We have enabled this by connecting the data centres.

When will you rationalise branches? Do you feel there will be a need for a voluntary retirement scheme (VRS)?

Before we migrate branches, we must meet the technology preconditions for inter-operability. We are unlikely to reduce the number of branches but may relocate them to markets where we are not present. For instance, in Horniman Circle (in Mumbai), we have two branches next to each other. We may relocate one of them to Navy Nagar or Malabar Hill. But in the next six months, I do not see this happening. We need more people. There will be re-skilling as we need more people on the sales side. We will be net job creators. As they say, you can’t shrink to glory.

Will you review the current partnership for selling third-party products?

For life insurance, our own group company (IndiaFirst Life) will be the primary provider. As far as wealth management is concerned, it is an open architecture.

Will the employee costs change because of the merger? How will you manage cultural challenges?

The government’s amalgamation statement makes it clear that the better of the three will be adopted. The compensation structure is almost identical, but there are areas like loan policy and insurance benefits that had to be rationalised. Other than that, the wage structures are almost identical. Culturally, there are a lot of similarities. So long as we can ensure that promotions and responsibilities are based on merit and not dependent on the predecessor bank, the cultural integration will happen faster.

What business would you look to grow in the merged bank?

We will pursue sources of growth that do not necessarily call for capital such as fee income lines — forex business, government business and remittances. The idea is to serve the target market, not just by merely giving them a loan. In retail, it will continue to be mortgages, education, personal loans and auto loans. We have invested a lot in analytics and the delivery platform for cross-selling. This will help us identify customers and sell more efficiently without form-filling or one more round of KYC. Growth will be balanced with a bias towards retail that is granular. By December, our corporate portfolio will be down by 3-4% and retail will be higher.

Past bank mergers have slowed growth for a few months because of the integration process…

We want to try and establish that business momentum does not lose steam. The proof of the pudding will be in the first-quarter results. We are reasonably confident that the amalgamation exercise will not disrupt — quite the contrary, given the fact that Dena Bank, which is under prompt corrective action, will begin to lend. We grew our deposits by 10% last year and we should inch it up to 13-14% this year. That will be necessary to balance our balance sheet. We are confident because we are building a lot more new products and there is a lot of focus on savings and current accounts. We have also made a lot of investment in payments, such as setting up point-of-sale machines.

How do you choose the products? Who will implement the integration?

We had 18 teams with leadership distributed to each of the three banks to work on the integration. The teams have selected the best of the products among the three banks. We have a war room with senior people working on it, which is overseen by an executive director.

Will there be more NPAs being recognised because of the merger?

We reviewed this when we did the swap ratio. As we go into the first quarter, the difference in accounting practices will have to be reconciled to the highest standard. So there certainly is a convergence of accounting standards that will have to apply. These differences exist on many lines, including the way depreciation is calculated, accrual value, etc.

Will margins of the combined balance sheet improve because of the merger?

Margins are improving because incremental assets are not having yield dilution due to of non-performing assets. Going forward, we are also looking to increase the share of the current account. There is no major change in interest rates.

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