Jury Notes: Between The Numbers

In fiscal 2016, we finally bit the bullet on the non-performing-assets (NPAs) front when Mint Road went in for an asset quality review (AQR). In one fell swoop, it became clear how deep the rot ran. Now what did it mean for the 9th edition of BW Businessworld Best Banks’ Survey (2016) with PwC as knowledge partner? It meant the universe of banks had to be re-looked afresh in the context of the AQR. The past performance of banks meant little; they had to be evaluated from the point of how well prepared they were to take on tomorrow’s world.

The jurors who were brave enough to volunteer for this edition were G. N. Bajpai, former chairman of the Securities and Exchange Board of India; V. K. Mehrotra, former chairman of the Life Insurance Corporation; V.Srinivasan, chief financial officer of Godrej Consumer Products; Rajesh Mokashi, managing director of Care Ratings; Dhanpal Jhaveri, managing partner of Everstone Capital; and Jaspal Bindra, executive chairman of Centrum Group.
 
The Pain Points
The jurors were of the view that an exercise of this nature would not only nudge banks to strive to do better but also send out a message on their health to all stakeholders. Hence, at the outset, it was decided that the emphasis will be on ‘quality of growth’ rather than its mere pace. Given the stress on bank-balance sheets — due to the AQR and in general, concerns on all matters credit — a significant premium was placed on banks’ risk-management practices.

For even at the best of times, it’s quite an unenviable task to pick out the best (and by extension, rank the not-so-good) among banks. A question that has been frequently raised in the past is: is a bank as good as it publicly declares itself to be? And now, post-AQR, doubts still remain. Is a bank only as bad as it publicly declares to be? Is the worst over? Of course, our survey is not premised solely on our knowledge partner PwC’s methodology; it was also subjected to scrutiny by an external jury that weighed the variables — uniformity of credit and deposit growth, market perception, management and corporate governance, the base-effect of size on growth parameters, growth versus risk, and efficiency in the use of capital.

The jury made a few changes to the classification of banks. While the number of awards up for judgement remained the same, the “Fastest-growing Bank” category was rechristened “Best-growing Bank”. The jury also felt there was still a lot of ground to be covered on the NPA front.

At the end of the exercise, the banks that made the cut were — HDFC Bank as the ‘Best Large Bank’ and ‘Best-growing Large Bank’; IndusInd Bank as the ‘Best Mid-sized Bank’; Kotak Mahindra Bank as the ‘Best-growing mid-sized Bank; DCB and City Union Bank were joint winners of the ‘Best Small-sized Bank’; RBL was the ‘Best-growing Small Bank’; Bank of America-Merrill Lynch as the ‘Best Foreign Bank’ and BNP Paribas as the ‘Best-growing Foreign Bank’. ICICI Bank emerged first runner up in the ‘Best Large Bank’ category; Yes Bank in ‘Best Mid-sized Bank’; Karur Vysya in ‘Best Small-sized Bank’; and Citibank India in ‘Best Foreign Bank’. IndusInd Bank’s managing director and CEO Romesh Sobti was chosen as the ‘Banker Of The Year’. The ‘Lifetime Achievement’ award was conferred on both  Arundhati Bhattacharya, chairperson of the State Bank of India; and the Late S. S. Tarapore, economist and former deputy governor of the Reserve Bank of India.

Happy reading!