Sucheta Dalal :Endgame?
Sucheta Dalal

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Apr 9, 2007

Few bankers or bureaucrats have had a more turbulent career than the UTI Bank chief, Dr P J Nayak. In a successful transition from bureaucrat to banker, he steered the bank to growth, profitability and excellence in service quality. He is also hugely respected and even hero-worshipped by the organisation. Part of the appeal is his uncompromising integrity; but apparently that is not good enough in India and he has had to walk away from the job every three years. In 2001, he went on leave when media leaks said that the Joint Parliamentary Committee (JPC) had made negative references to him in connection with an aborted merger with Global Trust Bank. The JPC made no such reference and he returned after the Board reaffirmed confidence in his leadership. In December 2004, he almost fell victim to Unit Trust of India’s attempt to pull the bank into its fold. A move to split the post of Chairman and Managing Director (CMD) was proposed, fully aware that Nayak would resign. The Finance Minister’s drastic and personal intervention scotched the move and ensured Nayak’s return. This time around, the ill-advised demand to bifurcate the CMD’s post has come from the Reserve Bank of India (RBI) as a condition to renewing his term. Again, Nayak has preferred to quit in July when his current term ends. The media has already begun to speculate about a hunt for a successor, but Nayak loyalists still hope the central bank will see sense.

Perverse policies

Policy making at the RBI is clearly at the whim of those in charge. If it really were a sticker for rules and correctness, then UTI Bank, fully owned by public sector entities, should never have been licensed as a new private bank. Once it was established, it should not have been allowed to adopt the nationalised bank model of combining the post of Chairman and Managing Director (CMD). RBI is not expected to hand out commendation letters but it must be sensitive enough to know that it cannot diminish a designation as condition to renewing a term, unless it is signalling displeasure. Its action merely underscores the perception that RBI uses the rulebook mainly to humiliate good bankers. In UTI Bank’s case the timing couldn’t be worse — the bank is one the verge of initiating a major re-branding exercise that will require careful handling. The central bank could certainly have found a more acceptable solution by suggesting that Dr Nayak becomes an Executive Chairman on the lines of State Bank of India’s (SBI) management structure. With SBI in the middle of a change in ownership, its senior management could also be at the receiving end of RBI’s ham-handed intervention. Finally, aren’t Nedungadi Bank, Global Trust Bank and United Western Bank proof enough that RBI would serve society a lot better if it focussed on bank supervision rather than nit-picking over the designation and perks of good bankers?

SHCIL’s associates

Over the last few weeks, we have slowly unravelled details of Stock Holding Corporation of India’s (SHCIL) many subsidiaries and their private shareholding, which has been carefully kept out of the public domain. For instance, SHCIL floated four subsidiaries in the last six months and each has a substantial private shareholding with unexplained linkages. One company, SHCIL Value Infosolutions, was promoted on 9th August, 2006, in Chennai with T Kannan Jagan and Indira Jagan as directors. According to the government website, Value Software Technologies Pvt Ltd is the actual promoter of this SHCIL subsidiary but subscribers to the Memorandum and Articles of Association are individuals. Our sources now explain the connection. Value Software Technologies, a private company, was actually promoted by T Kannan Jagan and his wife Indira Jagan. The company, funded by ICICI Ventures (a 33 per cent shareholder), can be seen on the Karnataka State Finance Corporation website ( in the “List of Major Defaulters”. The company is fighting litigation by many stakeholders for recovery of dues. SHCIL’s institutional shareholders are clueless about the need for private shareholding in its subsidiaries and the basis of their choice. Meanwhile, Sebi continues to remain a silent spectator.

-- Sucheta Dalal