A shiver passed down the banking sector's spine early in the year when Bank of India CMD MG Bhide proceeded on long leave. Reason: Bhide apparently could not see eye-to-eye with some of his colleagues on the bank board. Post a long hiatus, Indian Bank honcho S Rajagopal -- touted as a turnaround expert by many -- took over at Bank of India's helm. Later in the year, another drama unfolded at State Bank of India: Outgoing chairman MS Verma, after facing a spate of term-extension teasers, was finally replaced by MP Radhakrishan who will hold office for two months before retiring in early 1999. GG Vaidya will take over after him. This saw PK Bhatacharjee go red in the face on being superseded by Vaidya. And now over to the financial institutions: In place of IDBI's SH Khan came in GP Gupta from UTI and PS Subramanyam at UTI from IDBI and Narasimhan at IFCI from KD Agarwal. Phew!

A tale of retail

BankAm announced its decision to get out of retail banking, post merger withthe North Carolina-based Nationsbank. The sale of BankAm's retail business in the country is part of a larger Asian strategy to position itself as a wholesale corporate banking entity in the region, and be a leader across all its operational areas rather than trail competition. BankAm's move did cause heartburn for its 350 employees who will now have to bid adieu, albeit with a handsome severance package.

Shakeup and shape up

The country's largest foreign bank with 56 branches was really shaken up in an international restructuring exercise, which once through, will see a leaner and meaner entity emerging. The Australasian bank has suffered losses in Asia, and local operations have since long been perceived as fuddy-duddy. Recapitalisation is on the cards. Flab-shedding has not happened in a big way, despite a VRS. Reason: A strong union. Internally though, many an employee got a chance to grab higher posts with an appraisal system that openly gave many a chance to stand up and get counted in thenew hierarchy. ANZ banking group chairman John Macfarlane has made his intentions clear that personal banking and retail will be priority areas in the future. The same, however, does not apply to ANZ Investment Bank.

Encore, Narasimham

Former Reserve Bank governor and architect of the first phase of banking reforms in 1992 M Narasimham was once again called upon to script a second one. Major recommendations: A reduction in the centre's stake in banks to below 51 per cent, a 2.5 per cent risk weightage on GoI-Secs by March 31, 2000, and an increase in capital adequacy to 9 per cent. Present Reserve Bank governor Bimal Jalan acted pronto. In the busy-season credit policy, Jalan announced that banks will not only have to measure up to Narasimham committee's views, but went a step further with a 20 per cent additional risk weight on government-guaranteed securities of public sector undertakings, not forming part of the centre's borrowing plan.

Aspire for the universal

A working group underthe chairmanship of SH Khan called for a seamless financial market: A gradual move towards universal banking and evolving an enabling regulatory framework, establishment of a super-regulator, and gainful mergers between banks and FIs. But nobody really knew what it implied for business. The Reserve Bank, at least, put the super-regulator part on hold. But that was not all. New IDBI chairman GP Gupta, also a former colleague of Khan's, begged to differ. And in his very first day in office said: "I will not take the route of mergers and acquisitions to grow in future. In fact, we are too big an institution to get the benefit by taking over any small entities. M&As only benefit smaller institutions."

Smart buy?

After merging SCICI Ltd and taking over ITC Classic, and in keeping with ICICI Ltd CEO MV Kamath's vision of a universal bank, the FI acquired Sanjay Lalbhai's Anagram Finance. The swap ratio was fixed at one share of ICICI for 15 Anagram shares held, both of face values of Rs 10 each. ICICIgot to keep and leverage Anagram Finance's 52 branches and a retail network of 250,000 depositors. ICICI Ltd chairman N Vaghul said: "We will have to acquire more (companies) to grow further. Unlike the nuclear tests, three (mergers) are not enough. It all depends on the availability of acceptable ones."

Rate gain

Moody's Investors Service picked up a 11 per cent stake in Icra for a consideration of Rs 6 crore. The deal was the culmination of a three-year relationship that Icra had had with Financial Proformas Inc, a wholly-owned subsidiary of Moody's to provide credit education, risk management software, credit research and consulting services to commercial banks, financial and investment institutions, financial services companies and mutual funds in India.

Trusting along

Days after he took over as UTI chairman, PS Subramanyam had to face a nightmare. The Trust turned in a negative balance of Rs 1,098.49 crore in the reserve account of US-64 scheme on June 30, 1998. To cries that therepurchase price was higher than the scheme's NAV, Subramanyam held that the US-64 is not driven by NAV as in the case of others. "We had a negative balance as on June 30, 1998, at Rs 1,098.49 crore. This was on a particular date and does not tantamount to the fact that UTI has depleted its reserves and is in a bad shape. We will still pay the same dividends next year," Subramanyam said.