CAMARADERIE OF THE VAIDYANS

EXCLUSIVE WITH THE NATION’S REINSURER & NATION’S BANKER.

Dr M Geevarghese Vaidyan, a true banker with consistent excitement in both his professional and personal life. He is the Deputy Managing Director & Group Executive (Stressed Asset Management) in India’s biggest PSU, State Bank of India. A man of immense acumen who has always stood out in the crowd with his out-of-the-box approach in every assignment he has undertaken. Dr Vaidyan is married to Alice Vaidyan, who is the first woman to hold the position of Chairman & Managing Director in the country’s insurance company and only reinsurer, General Insurance Corporation India. FWD business magazine caught up with this extraordinary and down to earth power duo who shares a beautiful camaraderie.

M G Vaidyan cultivated the habit of doing things in a unique way from a very young age. In his tenure with SBI, he held various assignments and has steered projects efficaciously which had little chance of success. Dr Vaidyan’s banking experience is quite wide from retail, wholesale, corporate, SME, treasury, agriculture to micro finance. He was also closely involved in the setting up and running of two subsidiaries of State Bank of India, SBI Gilts (now SBI DFHI) Ltd. and SBI Life Insurance Company Ltd. As he completes his three and a half decade of service in 2016 with the country’s largest lender, we take a closer look at his various assignments and how he transformed challenges into achievements.

During your tenure in Tamil Nadu SBI became famous for the book-building initiatives, especially with gold loans. How did you motivate employees of a public-sector bank to go the extra mile?

Banking is a service and the quality of service depends upon the motivation of your workforce. In public sector and government undertakings, there was neither a provision to give incentive for good performance nor a provision to withhold anything for bad performance. Payment was always on the basis of fixed salary. But I believed in recognising and rewarding efforts and thus designed SBI’s gold loan campaign in Tamil Nadu accordingly.

We set growth targets to be achieved in a time period and the cash officers who were the prime drivers would be honoured with gold, silver and bronze crowns if they achieved those targets. We ensured that the prize distribution was a grand affair with Chief General Manager, the GM along with me, presenting the certificates and prizes. We also gave them the chance to address the gathering and share their experience. Such was the energy created, cash officers who were not willing to give out gold loans, and were now standing at the branch entrance and cross roads, inviting people to take gold loans from their branch. The approbation they received was a huge motivation and the campaign spread like wildfire.

This campaign attracted all-round attention which was good way to provide finance for the poor. The Chennai circle was No.8 in agriculture loans among the existing 14 circles. At the end of the campaign, we became all India No. 1. Through successive campaigns , the gold loan portfolio of SBI have now grown to 40, 000 crore from a level of less than 3000 crore. Till then, loans were disbursed to achieve the targets, but ever since that, SBI saw this as a lucrative business opportunity.

Innovative social marketing strategies seems to be your most preferred route, to spread awareness of SBI which now comes under the mandatory Corporate Social Responsibility. Your views on this?

I was the regional manager in Trivandrum and wanted to engage with the schools to spread awareness about State Bank of India. We used a unique format to approach them by honouring star performers of the school. The State Bank of India Talent Awards were made applicable for all the higher secondary schools in the entire state. Three rank holders from all the streams were given Certificates of Excellence signed by the CGM of the Bank. The Certificates were presented in the school assembly by an ex-student of the school, who had achieved a certain stature.

Through this we also promoted the habit of banking, by presenting a savings bank account in the joint name of the student with an initial deposit of INR 500 and an in-principle sanction for an educational loan. With the secondary exam results being released, and the awards being given across the state, there was mass publicity of the event in every district, thus giving a different approach to marketing. It is also an early stage customer acquisition as the certificate, the ceremonies will remain in the memories, while they start their individual careers and time to choose their banks. Later this campaign was extended to over 1 lakh higher secondary school across the rural and semi urban areas of India, SBI rural talent Award attracted media attention in2006 and was an internet hit.

Being part of the largest bank of India, you have had ample opportunities to watch the nation grow, especially the rural areas.

A significant part of the Bank’s mission was and still is rural banking and rural development since one of the biggest challenges the country faced was to take banking to rural India. After joining the Bank in 1979 I was posted to a remote branch in Ankleshwar Industrial Estate (in Gujarat). To reach the branch, I had to crawl under a goods train which was parked there for loading or unloading. The branch was in an industrial area, with no pakka roads or air conditioning and I shared a 10 by 10 feet room with a colleague. Once SBI opens a branch at a place, it initiates the development of the area. A Post Office, auto stand, school, businesses, etc. slowly follows one by one. All the places I have worked in rural assignment have transformed over the years into developed towns and cities.

What measures did SBI take to promote financial inclusion in the country?

As a part of SBI mission for financial inclusion, the bank wanted to adopt 1 lakh unbanked villages and I was asked to lead the project. I was also a member of RBI committee for rural penetration. The first biometric card was launched in Nov 2006 in Aizawl, Mizoram. The bio-metric card works on fingerprint identification and the card was called ‘SBI Tiny Card’. There were several challenges for its introduction like lack of proper telephone connectivity, challenges in infrastructure, and the need for a trustworthy thirdparty business correspondent. The biggest challenge was creating a sustainable and profitable business model.

After the successful launching of the SBI Tiny Card, state governments approached SBI for implementing this technology for payment of social benefit schemes to the poor. To everyone’s surprise there was an 8% – 10% savings for the government by implementing our scheme and making payment directly to the beneficiary’s account taking away the middlemen. It created a strong business case and other governments approached us for implementing it in their states. This led to other player entering the field with their own technological solutions. In fact, the SBI’s ‘Tiny Card’ initiative germinated the idea behind the ‘Aadhar Card’ and the Direct Benefits Transfer scheme that we have today.

Currently you are managing the stressed assets of the largest lender of the country. Can Asset Reconstruction Companies (ARCs) resolve the problem of stressed assets? This is the most challenging area in today’s situation where Banks are faced with stressed assets. How are you facing the challenge?

In contrast to the public sector banks, private sector banks has got certain freedom and capabilities when it comes to dealing with stressed assets, like selling or ensuring that the account is taken over by someone. This keeps the private bank’s stressed assets at low levels. Our actions are also subject to the scrutiny by CVC, CBI, RBI and other regulators and the banks are very careful to do a One Time Settlement (OTS) with any kind of hair-cuts. The recovery period is longer and the longer the period, the less you recover from the Non-Performing Asset (NPA). Only the real estate collateral will be left, which is claimed by various other government agencies.

Off late the sudden spike in the value of NPA happened due to revised guidelines by the RBI. The guidelines states that NPAs outstanding for more than three years to be provisioned for completely. This reduces your profit by the extent of the provision. In the developed country the settlement happens faster than India, mostly under a period of 3 years The value of the collateral is not to be considered when making the provision. With the complicated legal system, we rarely get a resolution in three years’ time. It’s a challenge that we are facing. In the meantime we are in the recovery mission and we have created a separate business group to address handling and recovery of the NPA’s and we have got branches all across the country.

An ARC sale is done for two reasons. One way is to channel the NPAs out of a bank by selling them to the ARC. Another way is when the ARC has the resource and capability to turnaround the NPA into a good account. ARC as a business model is new for India in an organised format. In western countries & US turn around companies & bankruptcy are proven and accepted business models with professional talent and resources. We are opening up in that front and let us expect that we get to see some great success stories in this space. What is of extreme importance is the speed with which the recovery process are initiated and implemented.

The Bankruptcy Code and the amendment to the Sarfaesi Act (The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002) is coming up and has led to courts becoming more helpful in passing orders. The Government has appointed DRT (Debt Recovery Tribunal) presiding officers to fast-track collection of NPA loans. If we can get a resolution on a NPA within three years, then there is no need for 100% provision.

There are several cases where there is 100% collateral against a loan in the form of real estate. Because if a borrower can get a stay order from the court, it can go on from year to year. The amendments to the Sarfesi Act will ensure that if the borrower wants a stay order, he will have to deposit 50% of the dues. The District Magistrate also has to ensure that the property is handed over within a period of one month. We are moving towards international standards with regards to time taken for resolution. More ARCs will be inclined to buy and in turn more banks will be inclined to sell.

Is there an alternative to the ARC route? Can banks employ independent management to turnaround a bad account?

The Strategic Debt Restructuring (SDR) and the Sustainable Structuring of Stressed Assets (SSA) are already there but the banks are getting used to it. These are being conducted on an experimental basis and we need time to see if it will be ultimately beneficial. Banks will have to take ownership of the entity and ensure that it operates smoothly. Banks have started taking ownership in cases where there is no other way forward. When banks take ownership, the debt is converted to equity which need not be serviced with a steady rate of interest payments. This improves the viability of the company, provided the company is able to operate smoothly.

Our experience says that all the defaulter will delay the process and to extract maximum haircut as this is supported by the lengthy legal processes. Thus the focus of my department is to significantly reduce the time taken for the intermediate process and straight way strike for recovery. For example, apart from taking dash under Sarfaesi act, declaring borrower errand is given by Reserve Bank of India. Under the recent Supreme court judgement has created a conducive environment for giving a favourable judgement towards the bank. Examining the defaulter in the early stages will force them to come to the table of discussion. I have been successful in bringing about a significant change in the recovery process and initiative within the bank.

Is it viable for SBI to be trading on NPAs?

SBI will seek to manage NPAs by taking it off the regular branches which needs to focus on its core business. When you spend time following up on stressed assets, that limits the ability of the bank to expand its business opportunities. The bank has created a separate vertical for managing NPA accounts. This has brought in good results. Apart from the fact that ARCs are unwilling to make large purchases without significant haircuts, our experience in recovering NPA through our own efforts have tend to yield better results.

While developing a foothold of SBI in South Africa, you chose to develop the retail wing of the bank. What was the strategy behind that?

The bank was only focusing on wholesale banking initially. I wanted to shift the focus to retail. During the time of the financial crisis, the inter-bank lending period was brought down from three months to overnight loans. From the liquidity point of view, the risk increased for the bank. There was a need to create a local, stable deposit-based pool of retail customers. Because lending had become more risky in those days, I shifted my focus from lending to treasury business and was able to generate significant return.

We opened eight new branches in the important locations of South Africa. We rolled out ATM cards and internet banking service for our customers. We were the first among the foreign banks to start such services that enabled instant fund transfer to any account with SBI group branches in India.

You are identified to be start-up enthusiast of SBI.

In a large PSU operating system, nothing can happen by an individual’s action alone; I needed to carry the team along with me to implement my ideas. I spent most of my time talking in an informal setting to understand what the problems were and come up with innovative solutions for it.

When SBI was mandated to start first primary dealer subsidiary in India, I was chosen to lead the company. This was a totally new area, and nobody was willing to set up the company. I headed the treasury department which is the core business of a primary dealer and in the first full year of operations, SBI guild designed a highest profit making non-banking subsidiary. Taking a cue from this I was inducted into SBI Life Insurance, I set up the treasury and investment department. SBI Life Insurance set up was one of the first seven private sector insurance companies. The management of the assets of the funds was only in government securities and other permitted assets for generating additional revenue. They would collect interest and on maturity collect the principal. SBI Life, decided to channelize a portion of the funds into trading in government securities to create revenue over and above the operating expense. This was not done by any of the insurance companies at that time and SBI Life Insurance became profitable in the first year of operations and was not required to replenish its capital. This was also within the norms and guidelines prescribed by IRDA. The idea was to increase the revenue earned by the company by taking permitted risks.

In 2007, with the advent of competition in the market and private sector banks coming into the scene, the market share was going down significantly which was a matter of serious concern for the bank. Augmenting deposit was the prime concern for the bank, with this aim in view, I created a totally new campaign by the name Do or Die Deposit (DDD) campaign, in the lines of the gold loan campaign in Tamil Nadu. Unlike any other campaign this campaign ran for 10 consecutive quarters and SBI’s market share increased every quarter, thus arresting the decreasing trend. Launching a second wave of branches, at a time when the entire market was talking about closing down of loss making branches, I conducted a thorough research study to establish a correlation between market share of branches and market share of business. Accordingly the second wave of branch expansion was launched by SBI and soon . Following the trend, other banks also started opening branches.

Innovative thinking has always been my forte, I came up with the McD (My Car Dealer,inspired from the fast food chain in the country) campaign. The car loan sale happens not in the bank branches but in the automobile showrooms. I found out that SBI’s name was not mentioned by any car dealers when approached for loan. With the McD campaign the car loan market share jumped from less than 8% to 20% in less than 2 years. The KBH (Kitna Baki Hai), KBN (Kuch baki Nahi) campaign was also designed by me to arrest the growing KCC (Kisan Credit Card) and Agri NPA which came down from 15% to 9%. Everyday sms of KBH from the branch manager of the rural branches would reach via regional and senior managers to me before noon. This type of monitoring campaign mode reduced the KCC NPA to almost nil.

Soon after Dr Vaidyan joined SBI in 1979, he along with four others were sent on foreign deputation to Los Angeles, US as the Credit Officer. While the others left the organization, he thought it was morally incorrect. He had taken the opportunity of the banks overseas deputation to complete his doctorate in business management from California. On asked about his motivation to work with national banks where the compensation is much lower than the private ones; according to Dr Vaidyan the incentive came from the challenges, he says, “It was like being a CEO of a new organization every three years and with regards to lucrative salary, everything was provided by the bank – accommodation, conveyance, medical expenses, and loans for any purpose. And an enticing fact for me is that if you go with a SBI business card, you will be welcomed anywhere on the strength of its brand equity.

Dr Vaidyan is an ardent reader and currently reading the ‘Autobiography of a Yogi’ for the third time! Books on management, philosophy and spirituality catches his interest. India has offered much to the world through yoga and meditation, but according to him we have only scratched the surface of these great gift from India to the world. He plans to travel and explore more on the aspect of Yoga after his retirement. Interestingly Dr Vaidyan is not only a yogi but he also loves to play soul music on his piano. Till this moment, Mrs Alice Vaidyan was intently absorbed in her husband’s conversation with us. Speaking about music made her eyes sparkle with vivacity, she too plays the piano with passion and doesn’t shy away to claim her command over baking cakes and cookies during the weekends. Mrs Vaidyan holds the top most position in the country’s only reinsurer, GIC. After her graduation in Chemistry, she decided to go for a post-graduation in English Literature and cleared the All India exam to join New India Insurance, a sector which she has been now serving for last 25 years. And then moved to GIC where she has been serving for the last 8 years.

You’re the first woman to head a public sector insurance company in India. Did you face challenges being a woman?

In all these years, I don’t think I have faced any gender discrimination. The industry is gender neutral. Travelling was the only constraint when my children were growing up. My family supports me to the hilt, I don’t think anything has stood in the way. The industry recognizes merit, irrespective of gender. The glass ceiling is only where you think it is.

GIC has been seeking to expand its reach to other countries. What kind of developments are we seeing on that front?

We have our branch offices in Dubai, London and Malaysia. In Moscow, we had a representation and it’s now being converted into a subsidiary. Latin America is another market we are exploring, we are going to have office in Brazil. All the ASEAN countries are places we are looking to grow. Vietnam, Cambodia, Thailand are potential areas of interest.

Because almost 40% of the premiums are from the US, that’s a market we can’t ignore in the long-term. GIC is an accepted reinsurer in Dubai and South Africa. We bought one in South Africa called SaXum Re and it’s now called GIC South Africa. Reinsurance works on the principal of spread, diversification across lines of business and geographies.

Since the markets have been opened up for foreign players, how do you see the competition affecting you?

We don’t see them as competition. We have been operating in this market for 45 years and are in a position of strength to utilize any opportunity from the market. 50% of the reinsurance market is underwritten by us. Increase in competition in Insurance is good, as the expanse of Insurance gets wider and the book of business in value will have a significant increase.

Where do you see GIC standing in the future?

Penetration in insurance is abysmal. It’s at 0.8% for non-life insurance and about 3.5% in life insurance. We are talking about a population that’s about 1.2 billion. So here exists an immense opportunity. It starts with creating awareness about what insurance is. We have to make sure it’s affordable for everyone.Training and up gradation of the employees is the biggest challenge. From the actuarial side, we have to recruit from the market laterally as the talent is scarcely available. There are a lot of life actuaries, but we don’t have many reinsurer actuaries. I send my people to the best academies to train them the moment they join the organisation. It’s a continuous process where we keep upgrading their skills. Attrition is a facet of any organisation, but we tell our recruits that we are not giving jobs, but careers. We can give them exposure to all facets of reinsurance which few others can give. Currently, GIC is ranked 14th in the world. We want to take it in to the top ten. I’m confident it will happen in the near future.

Considering both of you as a power couple, handling two independent profiles, which are high in stake one in the role of Nation’s Banker and the other as Nation’s insurer, how do you cope up with the work pressure and personal life?

We came into the notice of public because of mere co incidence of handling two large offices individually at the same time. Having said that, both of us have a history of a long, hardworking and earned career, which has our own shares of struggles, sacrifices as well as pressure points. Our strongest belief is that it was our humble upbringing, which instilled a lot of personal value helped us reach to this level. It is also important to acknowledge that both of us have sacrificed and made conscious understanding of situation of each other’s at the appropriate times. When Mr.Vaidyan was travelling internationally, Alice took a call to make Bombay as the base location and bring up the family from here, so that the children are not disturbed. We feel extremely thankful & indebted to god as well as our families who has supported us all throughout. More than anything, we feel lucky and proud to serve the nation through these responsibilities as husband and wife.

As responsible couple what is your biggest asset till date?

Personal and professional integrity is something, which we count as our biggest asset. Personally for both of us , as husband and wife, we are blessed by God that both of us are having partners in each other , where we can share the same intellectual wave length, which at times becomes very important.

Message to the youth as well as to the entrepreneur and the ambitious professional couples.

Keep it simple, love each other unconditionally, have faith to your belief, work hard, be thankful. Rest of everything will be the result of this.

Interview: Mathew Antony

Text: Sangheeta Bhattacharya & Anish Shanker

Photos: Jinson Abraham

Styling: Lakshmi Babu

Makeup: Shibin antony

Retouch: Jithin Mohan

Location Courtesy: Le Méridien Kochi

Special Thanks: Marks and Spencer, LuLu Mall, Kochi