Q1.

How did the bank, which was written off, emerge like a phoenix and
regain its position in the market place?
The Indian Bank which flourished up until the mid-eighties started incurring heavy
losses post the introduction of new norms by the Government of India and the RBI
in the early 1990s. The non transparent functioning of the bank, inability to counter
competition from private banks, poor HR management, widespread corruption
among senior management and lack of intent to change were cited as some of the
reasons for the bank incurring these losses. Then post 2000, a revival of the bank
was witnesses by putting the recommendations of the Verma committee into
action. This began with the team’s proposal for a change in management team and
the need to have a strong, competent and determined leader. This led to Mrs.
Ranjana Kumar’s being institution as CMD of Indian Bank in 2000. Indian Bank’s
turnaround post 2000 can largely be attributed to Mrs. Kumar’s efforts in
restructuring, leading and realigning Indian bank’s future to growth. The bank was
faced with several challenges – financially as well as in relation to the existing HR
practices. In times of distress, the employees and the bank at large was faced with
structural inertia. The organization had to go through several changes at various
levels.
The change at Indian Bank was in essence an interplay of various factors
and steps. Under Mrs. Kumar’s supervision, the bank underwent a complete revamp
of HR policies including institution of training programs, delayering, succession
planning policies, VRS schemes etc. Another major factor for the transformation
was the tremendous increase in trust of the employees witnesses at the bank. With
the management consulting the Union in all major decisions, the employees were
kept in the loop thereby increasing faith in the company decisions. Also, such
policies ensured that employees upped their motivation and revived self esteem
and instilled a feeling of individual contribution to the organization at a macro level.
Another facet of change brought about was the financial aspect with several
initiatives on better credit policies, NPA management, new partnerships for
business opportunities, emphasis on transparent processes, etc. All this, coupled
with brand management and perception cleansing strategies brought about a
drastic change in the bank’s fortunes. The government closely tracked the bank’s
numbers and developed faith in the change the bank’s system and infused multiple
rounds of capital into the bank to further bolster growth.
By taking the recommendations of the committee into consideration and
ensuring a revamp of business processes and HR policies, a strong top
management, dynamic leadership have helped transform the ailing bank.



Q2. Delineate the major elements in turning around Indian Bank. What
management strategies, styles and approaches did the organization need
to adopt during each of the phases?
The transformation of Indian Bank was due to a few major element such as
business process engineering initiatives and human resource development
initiatives. The initiatives under the first category were organizational restructuring,
credit management, management of NPAs, emphasis on planning, setting-up
committees and aggressive marketing. Strong leadership and innovative HRD
strategies fall under the second category.
Restructuring efforts: Under restructuring, bank’s four-tier structure was
converted into a three-tier one by doing away with the zonal level. Also, the
branches were segmented into corporate, commercial, personal and rural. There
was merger of 119 branches with nearby branches.
Management of NPAs: Prior to the 2000 period, the bank faced severe credit
related issues which limited the growth of the bank. Post Mrs Kumar’s institution as
CMD, the management laid special focus on bank credit policies like introduction of
an exclusive Credit Risk management Department, stringent credit appraisal
system and strict handling of account receivables etc. Also, central Asset
Management branch was formed, 5000 recovery camps were conducted and a
pragmatic compromise policy was introduced. Also the SARFAESI Act was enforced
to seize collateral assets of defaulters.
Human Resource Policies: A slew of HR related reforms were carried out like
employee training programs, periodic meeting for better union management,
introduction of VRS and delayering, etc. This led to a revival of employee
motivation and renewed vigor that individual contribution was well recognized by
the bank at large.
Transformations in business processes: This included introduction of more
ATMs, increase in number of partnerships with multiple agencies for new
businesses, computerization of branches, transparent functioning and better
corporate governance. The company’s methodology of working significantly
changed with primary focus on planning rather than yielding to market forces. This
ensured Indian Bank competed with other public/ private sectors banks on a gamut
of spheres.


Q3. What are the lessons for the industry from such a turnaround, in the
face of competition?

First and foremost, the major learning from the transformation of the bank is that
no single solution exists for the troubles of all organizations in the world. Although
all organizations share some form of common framework, every organization is
unique with a unique set of problems. Infusing capital cannot be the answer for all
ailing banks. This turns out to be the increasingly relevant in today’s scenario with
many companies facing dipping profits.

People are an important aspect of any organization. Therefore as observed in the
case study, only a combination of business-process reengineering and human
resource strategies can enable an organization to attain its goals in a sustainable
manner.

Leadership is also a major factor in ensuring efficient performance of a company. In
Ms Kumar Indian Bank found the right mix of rigidity and flexibility to pull the
organization out from the clutches of bankruptcy. She was a visionary who
showcased a lot of faith in her employees and assigning them apt roles for ensuring
the turnaround of the organization. A testimony of this fact is that she did not hire
any external consultant for the restructuring plan but rather relied on an in-house
team. She also lifted the sagging morale of the employees.

Another important aspect is the role of communication in an organization. The CMD
of Indian Bank always made sure that the employees (rank and file) are aware of
the direction in which the bank is going by regularly communicating with them. She
also made sure that the employees remain motivated and believed in the
turnaround plan.

It is therefore important for other institutions looking for a turnaround to look at
the lessons that this case study teaches us. Along with structural changes,
impactful leadership, human resource development, innovative practices and sound
communication are the basic ingredients of any successful organization.