Mumbai: A change of guard at Dhanalakshmi Bank Ltd, with Amitabh Chaturvedi taking over as managing director and chief executive officer in October, could come as a blessing in disguise for the lender that turned 81 years old this month. Chaturvedi is drawing up a recast plan and plans to put in place a top management team. To support the bank’s growth, the board could consider raising fresh capital before 31 March.
The bank had been under the regulatory lens for the high level of promoter holding and for its net worth being lower than the required Rs300 crore. The Reserve Bank of India (RBI) had for two years withheld permission for Dhanalakshmi Bank to open new branches and undertake other business initiatives because of such reasons.
Harbinger of change: Chaturvedi says he accepted the offer as a challenge to lead a change.
Now the house seems to be in order on both counts. Raja Mohan Rao, a businessman from Andhra Pradesh who held a 36.69% stake in the bank, has reduced his holding to 9.68%. The bank has through a rights issue raised its net worth above the Rs300 crore mark. In an interview, Chaturvedi speaks about his plans to recast the bank. Edited excerpts:
From ICICI Bank Ltd to Reliance Capital Asset Management Ltd and now to Dhanalakshmi Bank. What made you take this offer?
Last two to three years there has been a lot of controversy attached with the bank; however, the bank has survived. Structurally, there is no problem with the bank, there was a leadership issue. I accepted the offer as a challenge to lead a change in management with no strong brand name attached with it.
There is a market perception that this is a promoter-driven bank. How much operational freedom have you been promised?
I have received a mandate from the bank board and have full freedom to have my own team. Five-six years down the line we will be among the top five private sector banks in the country. Today, we are known as a regional bank, my aim is to make this a pan-India bank. At present, we have about 207 branches including extension counters.
The business strategy will evolve, work has begun. We are in the process of recruiting high-quality professionals. They would join the bank beginning January. The top 15-member team will have eight new recruits and the balance will be from the bank. To attract talent and make the existing remuneration system attractive, there will be employee stock options given to new and existing employees.
Have you been given a mandate of four-five years to turn the bank around, before it is put on the selling block?
RBI makes an appointment for three years... Then based on my performance the board could consider giving me an extension.
We will not be acquired by any bank. However, if there is a right opportunity at the right time, we would look at acquiring another bank that would give us more penetration. Even if there is a merger, the top 15-member core team of the bank will always be running the organization.
What are the kind of changes you would like to introduce in the bank?
Today, being a regional bank, we are less aggressive in lending and taking deposits. Being a small-sized bank, our capacity to lend is also restricted. The net worth problem is solved with the rights issue and we will continue to raise capital to fund growth and opportunities.
We would look at raising fresh capital by 31 March 2009. Raising capital will not be an issue; it is only about the pricing. For me the 15-member top management team will be the key.
On the business side we will continue to be conservative on unsecured lending, will focus on mortgage, credit card and auto loans. We are a cash-rich bank and will lend to all our existing clients with good credit history.
There is some talk in the market that you represent the Reliance-Anil Dhirubhai Ambani Group (R-Adag). With your appointment, could R-Adag fulfill its ambition of entering the banking space?
I am tired of answering that question; there is no Reliance connection to my appointment.