New CEOs of state-run banks ready to deal with bad loans right from the word go

When a CEO starts his tenure with a bad news, it actually works in the favour of the company, given that the CEO has no other choice but to up his sleeves and look at the situation in its eyes.

The same strategy has been adopted by the chiefs of state-run banks of India, to meet RBI Governor Raghuram Rajan's promise of a clean-up in the balance sheets of lenders.

The newly appointed CEOs of public sector banks have taken it on themselves to hike provisions and recognize NPAs. For this, they are ready for kitchen sinking, which means declaring bad news upfront.

At a press conference earlier this month, Bank of Baroda’s newly appointed CEO Jayakumar had said that he decided to recognise all NPAs thrown up by RBI's asset quality review in a single quarter and not spread it to the quarter that ends in March. This resulted in BoB reporting a net loss of Rs 3,342 crore for the December quarter, which was the highest ever for any public sector bank in India.

Analysts are of the view that new bank CEOs will want to start with a clean slate, which means that they can work their way up towards improving profitability from a low base.

In pic: Bank of Baroda CEO P S Jayakumar