Government backed IDBI Bank hires BCG for organisational turnaround
In a bid to reverse its declining fortunes, IDBI Bank has partnered with the Boston Consulting Group (BCG) to help boost its financial performance. The move comes in the wake of poor revenues and a high value of non-performing loans.
Government-owned bank IDBI has been seen a flailing financial performance in recent times. Aside from poor revenue growth, the bank is experiencing considerable losses, having lost Rs. 853 crore in the last quarter alone. To make matters worse, the bank’s tally of non-performing assets is on the rise, resulting in failure to meet the capital adequacy norms and its placement under the Reserve Bank of India’s Prompt Corrective Action plan.
Last year, IDBI’s total value of non-performing assets lay at Rs. 27,275 crore, a colossal sum representing nearly 12% of the business’ total assets. By the end of March this year, the figure had nearly doubled to Rs. 44,752, representing just over 21% of total assets. Last measured, the figure lay at Rs. 50,173 crore, comprising 24% of the total asset value.
The bank is evidently in trouble, joining forces with BCG to launch Project Nishchay, aimed specifically at reversing this downward spiral. BCG will assist the firm with a sustainable growth strategy that will cut costs and maximise revenues. This will be done through a combination of identifying and covering lacunae in the bank’s structure, capitalising on assets, and overall product and process improvement.
The consulting firm will help the bank in a variety of areas, with a special focus on: enhancing revenues, reducing costs, asset productivity, and overall program management strategies. IDBI is not the only creditor in need of help from the consulting industry. Reports emerged in recent months of the State Bank of India employing the services of consulting firms, including the big four of Deloitte, KPMG, PwC and EY, to help with insolvency proceedings on loan defaults and non-performing assets.
This is not the first time that IDBI and BCG have worked together. IDBI was originally established as a development finance institution by the government of India in 1964. Later, when the institution wanted to transition to a universal bank in 2001, BCG assisted with the transition strategy and program. Now, the bank has placed its trust in BCG again, and has also hired a Human Resource advisor along with Information technology experts in order to aid the turnaround.
