At Dhanlaxmi, time for pay cuts, old-school banking, exits, gold loans

Dhanlaxmi Bank, the Thrissur, Kerala-based lender, is set to announce a 5-40% cut employee pay packages under a new dispensation after the surprise exit earlier this month of its managing director and CEO Amitabh Chaturvedi.

“We are considering ways to reduce expenditure. Employee pay cut - or rationalising salaries — is one step. We will also consider reducing expenditure on things like electricity and travel to improve the cost efficiency of the bank,” said P G Jayakumar, who took over as MD & CEO.

Jayakumar, however, said the bank’s board is yet to make a formal announcement on this.

And, as reported by DNA Money on January 21, high-profile exits continue at the bank. Salil Datar, head of branch banking and non-resident business, has resigned, apart from Rajeev Deoras, head of credit and Manish Kumar, chief people’s officer.

Sources said many in the senior management had joined in the last three years taking big pay cuts. They had banked on a resurgent Dhanlaxmi to propel their careers.

The salary cuts are now expected to spur more exits.

There is also a strategic shift at the bank: instead of break-neck expansion, Dhanlaxmi will revert to old-school conservative banking.

“If you look at the international banking practices today, conservative is the way to go. We will try and balance new technology with conventional practices and look at bettering our relationships with customers,” Jayakumar said.

As a result of the upheavels, he expects Dhanlaxmi to clock a credit growth of 10-12% in this fiscal, compared with the 17% target for the banking sector set by the Reserve Bank of India.
“But we will surely cross the 20% credit growth rate next fiscal,” Jayakumar said.

He found no need to raise capital, and denied the buzz that the bank is practising restricted lending.

Dhanlaxmi’s capital adequacy stood at 9.88% as on December 31, 2011, compared with 13.39% at the end of 2010 December.

“Nor are we looking at branch expansion. We will try to leverage our current network of 275 branches better first,” Jayakumar said.
In retail, gold loans will now be a focus area. “There is no shame in the gold loan business. If you look at any south Indian bank, gold loans form about 30% of their book. We have only 5% and we would like to expand that significantly,” Jayakumar said.

Interestingly, Jayakumar, who was earlier expected to retire from the bank after February, is yet to receive the RBI’s nod to continue serving as the bank’s head.