There are very few turnaround stories in the banking sector, particularly among mid-sized banks. In the past, many such banks either merged or remained stagnant, and some are still struggling to make their way up. However, Bank of Maharashtra is an outlier. The bank, which reported a gross non-performing assets (GNPA) ratio of 1.84% in June 2024, an improvement from 2.28% a year earlier, has emerged as the winner in the Best Mid-sized Bank category of the BT-KPMG Survey of India’s Best Banks and NBFCs. The public sector bank (PSB) was put under the Prompt Corrective Action (PCA) framework in 2017 because of a high level of bad loans. In 2019, it was removed from PCA and has since become one of the most efficient PSBs. Central to this transformation is Maha Parivartan, the bank’s initiative aimed at effecting a complete digital transformation through advanced technologies such as Robotic Process Automation (RPA), AI-powered solutions, and digital lending platforms. Under this programme, the bank has streamlined processes and implemented robust compliance measures, focussing on delivering seamless digital experiences. Speaking about the digitalisation efforts, Nidhu Saxena, Managing Director & CEO, Bank of Maharashtra, says: “The banking sector is poised to grow at a rapid pace by digitalising financial services dissemination, further formalising credit to micro, small, and medium enterprises (MSMEs), adopting innovative digital operating models, adapting to the continuously evolving landscape, and driving consumption-fuelled growth for our economy.” The bank’s financial metrics paint a picture of resilience and growth. Its balance sheet grew by an impressive 92.65% from Rs 1.6 lakh crore in March 2019 to Rs 3.2 lakh crore in September 2024. Similarly, business volumes surged from Rs 2.3 lakh crore to Rs 4.9 lakh crore over the same period, reflecting a strong growth trajectory in loans and deposits. The bank’s success in maintaining a provision coverage ratio (PCR) of 98.3%—the highest among PSBs—has ensured robust financial stability. Measures like the appointment of resolution agents for high-value NPAs, the introduction of recovery schemes like the Maha Svanidhi Yojana, and a strengthened loan review mechanism have contributed to significant improvements in asset quality. After its troubles in the past, the bank has taken a proactive approach to building a healthy loan portfolio. It has put in place rigorous underwriting standards, including credit score benchmarks, to ensure approval of only quality loans, sources say. This has led to significant improvements in asset quality, with gross NPAs and net NPAs standing at an industry-low of 1.8% and 0.2%, respectively, as of the second quarter of financial year 2024-25. “We have taken steps to restrict fresh delinquencies, including the use of credit monitors, strengthening our loan review mechanism, broadening our monitoring framework with more objective asset performance review reports for spotting signals of early stress, identifying accounts for timely restructuring, strengthening our NPA recovery mechanism, assessing need-based credit limits, and regular follow-up for timely recovery of overdues,” says Saxena. To further its growth agenda, the bank has prioritised the retail, agriculture, and MSME (RAM) sectors, which now comprise 60% of total advances (as of September 30, 2024). The bank has also expanded its service delivery network, with more than 2,500 branches nationwide. Plans are underway to add 200 branches per year, with a goal of building 1,000 new branches over the next five years. However, there are some lingering concerns for the sector. Nirav Karkera, Head of Research at digital wealth management platform Fisdom, says the recent cut in cash reserve ratio (CRR) has provided mid-sized PSBs a temporary reprieve as they grapple with systemic pressures on margins and net interest income. “The combination of rising deposit costs and slowing inflows of fresh low-cost deposits—amid strong credit demand—suggests these challenges are likely to persist through the coming quarters. Adding to the strain are concerns over potential NPAs, particularly from priority lending sectors, alongside stringent regulatory norms, which do not make life any easier for these banks,” Karkera adds. The bank’s growth exemplifies the power of strategic vision and operational agility. With its focus on digital excellence, customer-centricity, and robust financial health, the bank is well-equipped to continue its journey as a trusted institution in the years to come. @imNavneetDubey
