If banking industry insiders are to be believed, bank chairman S Rajagopal spent most of his time in Delhi hobnobbing with the powers that be, instead of concentrating on rescuing the bank. One reason for this could have been the need to lobby for the Centre's bailout funds -- Rs 1,750 crore worth of recapitalisation funds. He succeeded in getting the money out of the government--but not from the bank's debtors. The bank fared very poorly in recovering the sticky assets built up by his predecessor M Gopalakrishnan, known for his proximity to GK Moopanar of the Tamil Manila Congress (TMC), a constituent of the erstwhile United Front (UF) government.

The bank's net non-performing assets (NPAs), which had been brought down by Rs 101 crore to Rs 1,779 crore in March1997, have risen again in the last fiscal to Rs 1,889 crore. In percentage terms, the NPA level went up from 25.91 per cent to 26.79 per cent. Despite an allout recovery drive, there has been a distinct slip in the recovery of bad assets. The top sticky accounts include MVR Exports, Ganapati Exports, East West Airlines, Saket India, Gemini Pictures, Square Deal Agency, JJ TV and Ramarao Adik Education Society. Some of these accounts involve politicians and their kith and kin. Some bankers say it is futile to blame Rajagopal for the shoddy performance of the bank, as he was handicapped in more ways than one. First, Indian Bank's woes became a political football, thanks to the Moopanar connection. AIADMK supremo J Jayalalitha and Subramaniam Swamy -- both political foes of former finance minister P Chidambaram -- alleged that the latter was trying to shield his TMC party boss Moopanar from being exposed in the Indian Bank scam. Whatever the truth behind the allegation, Rajagopal could not effectively hound thebank's defaulters as much as he should have. Even after the UF government fell, the ensuing political uncertainty continued to take its toll on the loan recovery process. When the BJP government took over with the help of Jayalalitha's support, the Indian Bank chairman's visits to Delhi became more frequent, as he was left with no choice but to explore "avenues" to revive the bank.

Bankers feel that Indian Bank is a classic example of how politics can kill a financial institution. The gross NPA figure of the bank jumped by a whopping Rs 1,373 crore between December 1994 and December 1995 -- the last year of former chairman Gopalakrishnan's tenure -- who has been quoted as saying that "NPA is a matter of perception." The beneficiaries include realtors, film producers and politicians. If sources are to be believed, a former chairman of a Mumbai-based mega nationalised bank had also indulged in similar practices of indiscriminate lending, and the bank is now paying the price as its NPA level is shooting up.The Indian Bank Officers' Association is, however, not ready to accept that all is not well with the bank. "We have done extremely well. We have registered 19 per cent deposit growth and the bank's dependence on call money has reduced to nil. We could have reduced the operating loss substantially had the recap funds reached us in time. The bank is on the recovery path as charted out by Icra," said the All India Indian Bank Officers' Association president AK Jana.