Looking back at Shikha Sharma’s 37 years of banking
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Summary
Shikha Sharma, when she leaves on December 31, will definitely have the satisfaction of leaving Axis Bank on a high.
To those, who in the past few days have written off Shikha Sharma, as she puts in her papers, it is worth reminding that she has a near four-decade innings in the Indian banking sector.
Hand-picked from IIM Ahmedabad in May 1980, by ICICI’s project finance team Sharma went on to work with the bank’s strategic planning unit that took the then young development finance company into merchant banking, credit rating and venture capital. She then set up ICICI Securities. But Shikha’s most enduring contribution to ICICI came after it became a bank. Converting a development finance institution into a universal bank required setting up a retail franchise: starting from scratch putting in branches, ATMs, tellers, recruiting and building the team, setting up distribution channels, putting in the IT infrastructure and product strategy for auto loans, housing loans, consumer loans, personal loans and credit cards. When Shikha left ICICI Bank in 2009, the bank had 58% of its loans to the retail sector, from literally zero in 2000.
Sharma had one more feather in her cap before she left ICICI. Given her experience in retail, she was picked to lead ICICI Prudential Life Insurance, set up after the sector was opened up to private players. Sharma managed those initial years with aplomb, with a mix of term products and ULIP and absolutely no regulatory violations despite feeling her way as the first ever private insurer in the country.
But the distancing from the bank proved costly for Shikha Sharma personally. When in 2009, the time came for choosing K V Kamath’s successor, Sharma lost to Chanda Kochhar, for whom, staying on in the main bank, turned out to be a huge advantage.
Shikha left in a huff, but such was her contribution that despite her joining the competition (UTI Bank, now Axis Bank), the ICICI board passed a resolution thanking her for her services. Sharma’s entry into Axis Bank was equally stormy. Outgoing chairman P J Nayak, the powerful ex-bureaucrat, had nurtured UTI bank from an ignorable government bank, a minor subsidiary of the Unit Trust of India, into a robust banking giant. Nayak could not stomach his board picking a candidate from rival ICICI and fiercely pushed insiders Hemant Kaul and MM Agarwal. The equally power-packed Axis board pushed back and voted 8:1 in favour of Shikha Sharma. Nayak stormed out of the meeting and the bank, not waiting to complete even his last few weeks in the bank, forget ensuring a smooth hand over to the newly appointed Managing Director.
But Shikha Sharma proved equal to the task. Her first strategy, one recalls from her initial interviews, was to diversify the loan book. When Shikha took over, Axis’s retail loans accounted for 23% of the total. Today it is 46%. Under her, the retail book grew 12 times to nearly 2 lakh crore. (Over the same period ICICI’s retail book grew only 2.6 times -albeit on a higher base – while HDFC Bank’s retail book grew by 4.8 times.)
Not blessed with robust subsidiaries like ICICI was, Shikha set out to create them. Right in her second year in office she bought Enam Securities, after a long and arduous due diligence by the regulator and some angst from shareholders. In four years, Axis Capital, which had not figured even among the top ten in equity raising, ranked first. Likewise Axis direct, Axis Finance and Axis Mutual Fund also grew to higher and higher ranks. Finally, Axis under Shikha did much better than most banks on digitisation: it popularised QR codes and UPI, purchased freecharge for easy bill payments and became the third largest issuer of credit cards.
What went wrong?
So what went wrong? Some loans for sure. Axis’s Gross NPAs (non performing loans) grew by 27 times under Shikha. In the comparable period, ICICI’s bad loans grew by 4.8 times and HDFC Bank’s by 4.5 times. And there were other regulatory run-ins. During demonetisation a couple of Axis’ bankers were allegedly caught trying to illegally change money. For the government and the RBI that was a cardinal lapse, considering the sensitivity of the issue.
Back to NPAs, the RBI’s calculation of Axis’s NPAs repeatedly turned out to be higher than what Axis recognised as bad. Central bank officials were miffed by the evergreening of loans by Axis as by most other banks. And finally, the leak of the results over Whatsapp, drew SEBI’s ire. To be fair all these sins have been perpetrated by a couple of other banks as well.
Also to Shikha’s credit, even in the worst cases of bad loans her personal integrity was never in question. But sources close to the regulator say their feeling was Sharma didn’t have enough control over her flock. Also the hasty manner of her extension in 2017, left a feeling that she probably strong armed her board.
Some believe her exit could have been the result of external circumstances. Was the regulator making an example of her after the fraud in PNB and the storm over the ICICI-Videocon affair? Is hers the first of more such forced exits in the banking system as the regulator sends out a message that they intend to clean up thoroughly?
The Q4 results are going to be a disaster for Axis, as it will be for many other banks. So, many will shake their heads and approve the regulator’s wisdom in questioning Shikha’s continuation. But to be sure by September 30, the worst of the NPAs will have been belched out by Axis. Shikha Sharma, when she leaves on December 31, will definitely have the satisfaction of leaving Axis Bank on a high. She deserves that high.
Note: The article was originally published on April 10, 2018 and is being resurfaced as Sharma will address her last press conference after the bank’s quarterly earnings on November 2, 2018.
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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow
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