Arundhati Bhattacharya, the first woman to head the country’s largest bank, State Bank of India, seamlessly implemented a number of path-breaking changes in the banking sector. Born into a well-educated Bengali family, she started off as a probationary officer at SBI in 1977 when she was just 21.

Gradually, Bhattacharya, through hard work and innate intelligence, fit the bill for various roles undertaken in her career, while maintaining a balance between family and work.

Known for her excellent people skills, risk-taking ability and knowledge of various departments in the banking sector, Bhattacharya in an email interview to PRASHANT MUKHERJEE talked about her unfinished tasks, the FRDI Bill and her first reaction after demonetisation. Excerpts:

Q: After an illustrious career with SBI – many call you the iron lady of Indian banking – what is the road you have chalked for yourself? Has the government approached you for some assignment?

A: At this point, I am in my so-called “cooling period or gardening leave” of one year. Once that period is over I will decide what to do.

Q: What is your view on the Union Budget?

A: The budget numbers are more or less fiscally prudent. The tax incidence as percentage of GDP is one of the highest while percentage of expenses less cess is one of the lowest. The emphasis on the rural economy is warranted, as in India demand always rolls up from the bottom and unless we create more demand we will not be able to push up capacity utilisation in the absence of which private sector investment is unlikely to revive.

Q: You will always be remembered for taking some bold steps at SBI. What was the most challenging decision for you personally?

A: It’s difficult to name one. There were so many difficult decisions I took during the four years of chairmanship, starting from when to raise capital, to the decision to merge six banks into SBI on one single day.

Q: Are there any regrets or any unfinished task you wished to complete?

A: Yes, I would have liked to have completed the resolution for some more /majority of the large NPAs. We did resolve some large accounts but they were not enough.

Q: Under your leadership, the SBI was the first bank to name the high-profile Vijay Mallya and two of his companies as willful defaulters. What were your thoughts then? Did you receive any pressure not to take his name in public?

A: I have rarely discussed individual accounts in public. I do not want to begin now. Suffice it to say that any borrower who has provided a personal guarantee and appears to possess large personal means needs to be proceeded against for recovery of bank’s dues.

Q: What is your assessment of the country’s economy and the staggering levels of banks’ NPAs?

A: The country’s economy is doing well. A look at all macro parameters indicate that a full-scale revival is likely to take place in the next few quarters. As for NPAs, there are several reasons for them. India is not the only country afflicted with this burden. Several countries, including developed nations, have gone through it at different times. The right way to approach this issue is to analyse the reasons for this situation and take corrective action to prevent a repeat in future.

Q: It has been over two years since the RBI introduced the asset quality review (AQR) to figure out how bad the NPA scenario involving Indian banks was, but we still don’t know whether the worst is behind us. What, in your view, could be a solution to this mess?

A: This has been discussed time and again by various experts, scholars, analysts, economists and bankers. I think the government has initiated the process of bankruptcy through the IBC, which is a step in the right direction. We need to await the outcome of the same.

Q. Are you satisfied with the actions taken by the government on the NPAs front? Do you support the idea of dragging major defaulting companies to the NCLT?

A: The banking industry, and I particularly, had sought the Bankruptcy Code. There is therefore no reason whatsoever not to appreciate the speed with which it has been promulgated and acted upon.

Q: The announcement of demonetisation was as much a surprise to bankers as it was to the rest of the country. What was your first reaction when you received the news?

A: The first reaction was to get out of RBI and organise my people. At that time I did not even know at which centres new notes were available and in what amount.

Q: Was demonetisation the right move? And, do you think digitisation should be forced upon the public when the country lacks basic cybersecurity infrastructure?

A: Demonetisation achieved a few positive things: i) It brought in huge deposits (resources) for the banking industry. The resultant liquidity enabled banks to reduce lending rates by a full 100 basis points. ii) The quantity of small notes had reduced to 13.5 per cent of the cash in circulation.

This appeared to indicate that cash was being used for more and more large transactions (this seems to indicate tax avoidance) and hoarding. Demonetisation put a brake on this. Till a few months back, the quantum of small notes had increased to 28 per cent of notes in circulation. iii) The money deposited did leave money trails and prompted several subsequent actions such as the crackdown on shell companies.

All of these will ultimately help in formalising our economy, which is a crying need. iv) Two to three years of digitisation happened in the space of 60 days. In response to the next part of your question, we need to accept that digitisation is the way forward. However, our country’s infrastructure will definitely need improvement, if we are to reap the full benefits of digitisation. Cyber threats need to be addressed in all earnestness.

Q: The SBI recently earned Rs 1,771 crore as charges from accounts not maintaining monthly average balance. What is your stance on such charges?

A: First and foremost we need to clarify that financial inclusion accounts like PMJDY and Basic Savings Bank accounts (BSBD) are not subject to any charges. There are several charges a bank incurs for maintaining accounts. A transaction on one’s own ATM costs between Rs 11 and Rs 12. A transaction on the ATM of another bank can cost as much as Rs 18.

Over and above that are charges for the entire hardware and software, including costs of passbook printing machines and the upkeep costs of such hardware. All banks levy such charges. SBI had waived it about 6 years back, but situations change.

In those days we did not have such large numbers of Financial Institutions and BSBD accounts. We need to ensure the health of the bank. Only a healthy institution can serve its customers well. As such periodically we do review charges to ensure that our earnings and expenses keep pace.

Q: What is your take on the FRDI Bill which allows the banks to use depositors’ money to bail themselves out in the event of bankruptcy?

A: The bill is a great improvement on the situation prevailing today, when in the case of bankruptcy depositors can only get the insured amount of Rs 1 lakh per depositor. It is very important to fully understand the provisions instead of scaremongering. It is extremely unlikely that these provisions will be used unless the government itself is on the verge of bankruptcy as had happened in Cyprus.

Papers like yours need to provide the right insight into such developments. The bill will ensure more stringent stress testing of banks, ensuring that the risk appetite of the bank is properly controlled so that depositors’ money is never under threat.