Banking on blunders

BIZ street Chiranjit Banerjee
BANKERS HAVE not been a popular lot with investors and savers for a while now. But they only have themselves to blame for this erosion in credibility. RBS is haemorrhaging after the reckless takeover of ABN Amro Bank. Obviously, the Scottish bankers threw due diligence out of the window in their attempt to turn cowboys.
Nomura acquired Lehman Brothers' troubled assets including all its overvalued human resources in India in October last year and by April of this year, they had let the entire leadership team headed by the three prima donnas, Surojit Shome, Prashant Purkar and Ashok Mittal go.
Nomura's senior management in Tokyo seemed to be blissfully unaware of the potential lemons that the overpaid traders of Lehman India had stocked in their portfolio when the takeover talks were on. The sacking of the leadership team that followed was a typical case of "buyer's remorse."
The grapevine is now flush with the series of blunders that seem the series of blunders that seem to have been committed by a vintage European Bank that has been a relatively late entrant to India. This bank's captive technology unit that is located close to mumbai has experienced a churn at the highest level within a year of operations as the off-shored enntity missed all its cost savings targets.
Sources point to the imprudent hiring of top deck managers. none of whom were weaned on functional banking. Almost all its senior management was drawn from a mid-sized Indian IT services company thanks to the former chief executive officer's largesse.
Despite clear instructions from its headquarters, the local management did not bring on board proven banking technology professionals. It was only when the ineptitude of the clueless top managers became visible to the bank's chief investment officer that the bank embarked on a massive recruiting campaign to snap up talent from peer group banks but it was a case of "too little, too late."
As supply hardened, mid level managers were being offered twice and even thrice of their salaries to come on board. As a result, the cost spiral went berserk. The response of the executive management board of the bank was to freeze further growth in India and build a parallel off-shortng competency centre in South East Asia which was not the smartest move given the far higher set up and wage costs of the region.
In the midst of the rollout of this patently flawed strategy, the few effective managers who were drafted in later by the ineffective Indian Local Management were left between a rock and a hard place. In this moment of truth, they could not derive even an iota of inspiration from the virtually redundant business heads who neither had strategic focus nor domain expertise.
India lost out as a result as the higher end designing work went away to South East Asia and the "grunt work" stayed put in our country. But unlike Nomura who acknowledged the problem and took corrective measures, this bank continues to be in denial about the nepotistic hiring upfront that took its Indian back office operations nowhere.