Tell us how it all happened.
Whenever a bank goes into Section 45, RBI decides to call for interest. It is their choice to decide who they call. They would have called some banks, including us. But we are a publicly listed company, so they gave us enough time for us to talk internally and to our home regulator. It took more than a few weeks for us to run through our process. LVB was already declared as having negative equity. RBI had started the process just before Covid and put the process on hold (due to the pandemic) which worked to our advantage. Because we are a wholly-owned subsidiary it is likely that RBI is to give us an inorganic opportunity only if a bank is stressed, which is also mentioned in the guidelines. The fact that we subsidiarised was very clear that we wanted to grow. And RBI knew that the partial reason for subsidiarisation is if there is an opportunity, we should be brought into the equation – whether we will do it or not was our choice. In this case, they went to more than one bank, because they have to at least get interest from one other bank before they can do this. They never shared with us but we told them what we needed.
How did you start?
As soon as we went in, we started looking at contracts and quickly realised where the problems were. We ran an assessment with an external partner to assess the capability because we also wanted to make sure that if somebody was good, we could retain them. We had acquired 3,800 people. We needed to assure the good people that they had a future and that they would not be treated differently. Every one of them went through a process, we got scores, and we ranked them. We started to give them responsibilities and empowerment so that they then became ambassadors for the rest of the organisation. We did an equalisation of grades and salary before we even did pension. Currently, there are no separate grades, everybody is on one grade system. We hired 100 people in the first three months to put them into places where we wanted to grow. And since then, we have added another 2,000 people. We did not treat it like a separate unit but integrated it into our businesses from day one.
Can you elaborate on the people challenges and your response?
The way Section 45 amalgamation happens, the shareholders are removed urgently. There were some people who had a history with the previous management and within the first 90 days, we cleaned up all of them. To our mind that was the biggest hassle identified. But we did not get into it without knowing anything. We did enough work before the amalgamation to know where the problem areas were. Not only LVB we did that for two years on two or three banks. We did not know which one RBI will ever offer. But we knew that a situation might happen where one, two or three of them might spin loose. So we have done a lot of work and continue to do work on potential companies across the world. We look at people or businesses which we think might spin loose and we do the work, because unless you do a lot of work well ahead of time when the situation happens you are unprepared.
How has the progress been after two years?
We have now completed the full migration of the people. All our employees are now on defined contribution. Earlier some employees were on defined benefit plans which allowed them to get a pension till their life followed by their survivors. So the bank had to constantly re-evaluate the obligation and keep providing for it. We have moved everyone to a defined contribution where employees can take out their provident fund at the end of their employment and choose what to do with it. We paid for them to convert to this new scheme, which is why we took a fairly large reserve in the last two years reducing our profits. But after accounting for all these costs, we now expect our profits to be up in FY23. All branches and technology are on one system now and we may see some partial impact of the integration costs for last year. Our balance sheet is now more than ₹1 lakh crore with deposits close to ₹60,000 crore and assets about ₹45,000 crore. We are now a single unified bank with 530 branches, across 356 cities.
