The Turnaround of Indian Bank
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Case Details:
Case Code : BSTR104
Case Length : 10 Pages
Period : 1992 - 2004
Organization : Indian Bank
Pub Date : 2004
Teaching Note : Available
Countries : India
Industry : Banking & Finance
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Excerpts Contd...
Efforts at Restructuring
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Efforts at reviving the Indian Bank began in July 2000 when the management, led by Kumar, submitted a plan to the GOI with details of the steps it proposed to take during the three-year restructuring period.
Kumar requested the finance ministry to provide recapitalization funds, but the
government decided to defer it till the bank showed a distinct improvement.
Kumar began the restructuring by entering into a written agreement with the
trade unions, seeking their cooperation on the three year long initiative. Soon
after, the bank's structure was modified to make operations simpler and ensure
quick decisions. The original four-tiered structure was modified into a
three-tiered one, by doing away with the zonal office level...
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The Revival
The official turnaround period of the Indian Bank was three
years - 2000 to 2003. However, efforts started yielding fruit within the
first year itself. The first ray of sunshine came in 2000-2001, when the
bank posted its first operating profit of Rs 61.59 crore after suffering
losses for years.
The turnaround finally happened, when the Indian Bank posted its first net profit of Rs 33 crore in six years in 2001-2002. In the fiscal year 2002-2003, net profits increased by 468 per cent to Rs.188 crore(Refer Exhibit-III).
In the Business Standard Annual 'Banker of the Year Survey' 2003, the Indian Bank was ranked second on the growth parameter. Analysts felt that this was no mean achievement for a bank, which was in the throes of losses half a decade ago. The honor was not surprising, as over 25 percent of Indian Bank's business since its inception had been done in the three-year period between 2000 and 2003 (Out of the total business of Rs.40,000 crore, Rs.11,000 crore
was gained during the three-year period)...
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Looking Ahead
Encouraged by the progress achieved during the three years of restructuring leading to the turnaround, the Indian Bank developed a new long term vision document called Vision 2010. The document, which embodied the vision of the bank, looked ahead to the year 2010 and included plans for a public issue which was likely to open in early 2005 (According to norms laid down by the Securities Exchange Board of India , an entity can come out with an IPO only if it posts profits for three consequent years and the Indian Bank was expecting to post its third consequent profit in the fiscal year 2004)...
Exhibits
Exhibit I: The Seven Parameters of Efficiency Adopted by the Working Group
Exhibit II: Loans Offered by Indian Bank (2003)
Exhibit III: Indian Bank's Net Income Over The Years
Exhibit IV: Business and Profitability (A Comparative Analysis)
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