NEW SBI TOP BRASS, PRATIP CHAUDHURI AND HIS THREE MANAGING DIRECTORS, UNDER GOVERNMENT SCANNER

The performance of the new State Bank of India management is under the scanner, given the steep rise in the provisioning levels and the manner in which the country's largest lender handled the Moody's ratings downgrade.

Top government officials are blaming the new management comprising chairman Pratip Chaudhuri and his three managing directors for a change in policies, particularly on provisioning, that resulted in a sharp decline in profits and the capital adequacy ratio and eventually in SBI's rating being downgraded by a notch to D+. SBI's profits fell 99% to Rs 21 crore in the fourth quarter of the last fiscal. During the first quarter of FY12, things appeared a little better with the bank reporting a 46% decline in profit at Rs 2,914 crore.

"A change in the top two or three officials does not mean that the policies will change completely," said a senior government official, requesting anonymity. "Someone can't be doing things that show him in good light," added another senior official. The other criticism is the way the SBI management handled the ratings downgrade by Moody's."There were no protests from them. It looked as if the episode was used to make a stronger case of capital infusion," said the first official.

Even analysts say that there is a distinct change in style--from Chaudhuri ending his predecessor O P Bhatt's resistance on ending teaser rate home loans to changing the focus on lending. SBI, the country's largest lender accounting for nearly a quarter of the market, has been seeking around Rs 12,000 crore from the government for nearly three years as part of a Rs 20,000 crore rights issue to help grow its business. The finance ministry has, however, not acceded to its demands citing budgetary constraints. While Chaudhuri and three new MDs - Hemant Contractor, Diwakar Gupta and A Krishna Kumar - took over this April, the demand for fund infusion continued but the government was unrelenting. In fact, officials had suggested that SBI could make do with the present available headroom only to change their position following the downgrade announced last week.

Now there are indications that the government will pump in around Rs 5,000 crore during the current financial year to help shore up the capital adequacy ratio with Tier I ratio dropping below the 8% comfort zone. 'There is zero demand for loans in case of new projects. 

SOURCE: http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/new-sbi-top-brasspratip-chaudhuri-and-his-three-managing-directors-under-government-scanner/articleshow/10349497.cms