Bank of Baroda uses centralized war room to spur lending decisions

Mumbai: A room with a giant screen displays project-wise data, colour coded to show the stage of its implementation, and adorning one of the walls is a mascot of a warrior.

This is the war room where top executives of Bank of Baroda take the biggest credit decisions and firm up plans so that they are implemented across the bank immediately.

The changes are part of the bank’s transformation plan, Project Navodaya, it started implementing in August.

Lending decisions across the country and otherwise, says P.S. Jayakumar, managing director and chief executive of Bank of Baroda, are now being taken by a single team.

“We have moved all credit decisions centrally to Mumbai. We have merged the large mid-corporate and even the international lending business to a central team,” said Jayakumar, who recently completed a year as chief of the state-run bank.

Shifting lending decisions to a central team helps the bank quickly figure out which companies are worth lending to and expedite approvals.

The bank has further broken up its central team into sector-wise verticals.

“We also realize that in many areas, we may not have the maximum amount of skills and competence. So, we have to train people there. The training may either be through meeting clients who are in that business or going to training sessions conducted by rating agencies and such,” Jayakumar said.

Parts of the centralized monitoring software have been developed by consulting firm McKinsey & Co., which is also the sole consultant for Project Navodaya.

Jayakumar was one of the two private sector officials that the government had appointed to run public sector banks. Rakesh Sharma, a former chief of Lakshmi Vilas Bank, was named managing director and chief executive at Canara Bank last year.

“We are increasingly insisting that all our meetings happen at the client’s office. Usually, I go with the executive directors and some of the other senior officials at the bank to these meetings. It gives a better sense of who we are dealing with. Usually, the clients will also bring their whole team,” Jayakumar said.

Such meetings help the bank better understand the need of its client base and improve upon services which can help better its involvement with them. By the time the teams leave the room, both sides have a fair idea on how to proceed next, he added.

Consistent monitoring and a central decision-making process has started creating a pipeline of lending opportunities, which the bank will be taking advantage of in the near future.

Senior board members and officials are consistently in touch with the bank’s employees through informal communication channels such as Facebook and WhatsApp groups to ensure that the morale is always high and these employees have an easier way of reaching the senior management when they want to discuss something.

The lender has already been through two transformation programmes in the past. In 2005, it had performed a rebranding exercise where it changed its logo and had appointed Rahul Dravid as its brand ambassador. In 2009, the bank had undertaken a business process re-engineering process to transform the way its executives worked.

“The fact that some of the senior officials who were there at the time of the previous projects are still around to give us valuable insight on what works and what doesn’t has also helped,” Jayakumar said.

Bank of Baroda has managed to arrest the accretion of bad loans on its books during the September quarter.

Jayakumar believes that while this is partly due to better monitoring of accounts, an improvement in recovery efforts and efforts from the branch staff have also helped tremendously. During the second quarter, the bank added Rs2,252 crore worth fresh slippages to its bad loans, while Rs2,903 crore worth of bad loans were removed from the bank’s non-performing asset book through recoveries, upgrades and write-offs.

“It is nice to have an excellent tool such as the one Bank of Baroda has conceived. Its effectiveness lies in the implementation and the usage of tools rather than its features,” said Ashvin Parekh, managing partner at Ashvin Parekh Advisory Services LLP.