The government on Monday appointed IDBI Bank MD and CEO, M.K. Jain, as Deputy Governor of the Reserve Bank of India in place of S.S. Mundra, who had completed his three-year term in July. Mahesh Kumar Jain began his career in Punjab National Bank and later moved to Syndicate Bank before becoming an ED, and later head of Indian Bank.
Significantly, in 2016-17, when most public sector banks were facing the heat of rising bad loans, leading to investors dumping stocks, Indian Bank was a notable exception. The Chennai-headquartered bank was then headed by Mr. Jain and the performance of the bank did not go unnoticed by investors and the government. Indian Bank’s bad loans were (and continue to be) among the lowest among PSBs.
IDBI Bank was hit by a rise in bad loans. Within a month of Mr. Jain joining IDBI Bank, the banking regulator placed it under its prompt corrective action framework that imposes certain restrictions on the lender. Banking industry sources said Mr. Jain was appointed to head the erstwhile infrastructure financier to help change its fortunes, and eventually enable the Centre to sell its stake at a premium.
While IDBI Bank widened its loss in FY18 (its gross NPA was close to 28% but the loan-loss ratio improved to a healthy 63.4%), the books of the bank have been cleaned up to a great extent and the lender is expecting to stage a turnaround in the second half of the current fiscal. Mr. Jain’s appointment to the RBI also comes in the wake of the Centre opening up the vacancy to professionals from the private sector as well as from the government.As a result, applications were received from candidates in private and foreign banks and also from bureaucrats.