Axis Bank’s losses and CEO Shikha Sharma’s fall from grace: The buck always stops with those at the helm

One of the pitfalls of being feted as a celebrity is its downside -- when the person commits an indiscretion, it attracts full-blown negative publicity and when the person falls on the wrong side of the law, he/she falls from grace. In short, one's celebrity status has a dangerous flipside to it.

CEOs of top companies often find themselves in this boat. When the going is good, they are feted and hog all the adulation, as well as a good chunk of the salary pie. Chanda Kocchar, the CEO of ICICI Bank, who is in the doghouse over a Rs 3,250 ICICI loan to the Videocon group was earlier hailed as the woman who broke the glass ceiling in a male-dominated industry. But now, not only is she in the doghouse but her envious salary of Rs 7.20 crore per annum is being questioned as scandalous in the context of the average salary drawn by ICICI Bank employees.

Axis Bank’s losses and CEO Shikha Sharma’s fall from grace: The buck always stops with those at the helm

A file photo of Shikha Sharma, MD and CEO, Axis Bank. Pic courtesy: Axis Bank's website.

Shikha Sharma, who took over the reins of Axis Bank in 2009 after quitting the ICICI Bank group, alas, has also suffered the mortification of being in the same boat as her former colleague and professional rival Chanda Kocchar. Only Sharma's travails are of a different kind. While Kocchar is facing the heat of criticism of extending an improper loan, a loan to her husband’s benefactor, Sharma has been facing a sling of arrows on multiple fronts.

Firstly, over the fact that she presided over the piling up of bad debts or non performing assets (NPA) at Axis Bank. While the festering NPA problem is identified with public sector banks (PSB), Axis and ICICI are two private sector banks that have been unable to live up to the legendary reputation of private sector banks, in guarding their flanks against reckless lending resulting in lower immunity from the NPA problem. Axis Bank’s NPA mounted from 0.96 percent in December 2009 to a whopping 5.28 percent in December 2017, casting a slur on her otherwise distinguished career, which followed a b-school education from the IIM Ahmedabad.

Secondly, Axis Bank has also been pulled up twice by the Reserve Bank of India (RBI) for under-reporting bad loans for financial years 2016 and 2017. The divergence i.e. the difference between the RBI’s and the lender’s assessments—was around Rs 9, 480 crore, nearly one-and-a-half times the amount reported by the bank. In financial year 2017, the lender once again reported a loan divergence of Rs 5,633 crore, denting its financial credibility in a big way. The results for the last quarter of the financial year 2017-18 has been unedifying— Rs 21.89 billion after the central bak wrenched away all the wiggle room for banks to window-dress their accounts. Almost all the schemes, such as corporate debt restructuring, sustainable structuring of stressed assets or S4A, strategic debt restructuring, and flexible structuring of existing long term project loans stand abolished. The joint lenders forum (JLF) designed to resolve potential bad debt has also been disbanded. The RBI read the riot act to the banks in February 2018. That was the final straw in the camel’s back -- Axis had no place to hide its bad loans.

Thirdly, Axis Bank came under increasing scrutiny during the heady and frightful days of demonetisation, in November and December 2016. 19 of its employees were suspected of playing ball with crooks in laundering their ill-gotten demonetised currency notes resulting in numerous raids on its branches.

Furthermore, in December 2017, market regulator SEBI cracked the whip on Axis Bank, which allegedly facilitated the leakage of price sensitive information to whatsapp investment groups.

In the event, Sharma’s exit was always on the cards though she sensibly tried to contain the damage by pre-empting the RBI move, to cut short her fourth extension by two years out of the three granted -- she offered to quit, reading the writing on the wall. History would have a difficult job of judging Shikha Sharma’s career at Axis Bank. Was she a victim of circumstances over which she had little control? Or was she slack in controlling her employees? The truth, as always, lies somewhere in between.

(The author is a senior columnist and tweets @smurlidharan)

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Updated Date: Apr 27, 2018 15:35:04 IST

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