Bank of India banks on Project Connect to tackle bad loans

Bank of India’s new chief has launched Project Connect, an initiative to revive the bank that has suffered huge losses for two consecutive years due to a sharp rise in bad loans. 

“It is called Project Connect because the Connect between internal staff and clients is not as strong as it was in olden days. So, many accounts are poached by other banks,” Dinabandhu Mohapatra, CEO of the state-owned bank, told ET. He said the new initiatives are aimed at reducing bad loans, improving the share of low-cost deposits and retail credit. 

In an unprecedented move in May this year, the government ordered two executive directors — D Mohapatra and Sunil Mehta — to join bigger banks such as Bank of India and Punjab National Bank while demoting existing chiefs to smaller banks. Originally, Mohapatra and Mehta were slated to join smaller banks — Syndicate Bank and Allahabad Bank, respectively. 

Banking analysts said both chiefs are under pressure to repay the confidence that the government has reposed in them. Bank of India has posted huge losses for two consecutive years and has run up total bad loans of close to 13% in FY17 before making provisions, but the chief of the bank is confident that the Reserve Bank of India will not impose any restrictions on it even though these are good enough triggers. 

So far, RBI has initiated prompt corrective action (PCA) on six banks — IDBI Bank, Bank of Maharashtra, United Bank of India, Central Bank of India, Dena Bank and Indian Overseas Bank — by putting restrictions on their banking activity. “Triggers are there as per the guidelines, but they have only brought banks under PCA which are having net NPA of over 10%. They have not initiated it on banks up to 9% — we are much below 10%,” said Mohapatra. 

Bank of India’s net NPA is 6.9% as on March 2016-17. “RBI is not targeting gross NPA,” Mohapatra explained. On Project Connect, he said the bank will have 115 area managers who would be stationed close to 30-35 branches and would be responsible for these branches; they would be on field and not have a formal office and would monitor and support the zonal offices. 

Further, the bank has opened a new vertical ‘Premium Client Care’ which will cater to the needs of the 1,000 top customers identified from the top five centres of the country. “With this initiative, poaching can be stopped because now most PSU banks are focussing on recovery, and in the process, they are losing good customers. We should not concentrate only on firefighting, we should be proactive for the future,” he said.