Bank Report

Bad loans to information leaks: All that went wrong at Axis Bank under CEO Shikha Sharma’s watch

The IIM-Ahmedabad graduate is credited with building the private lender’s investment banking and the retail businesses. But all was not smooth-sailing.

The troubles at India’s private lenders are escalating.

Shikha Sharma, managing director and CEO of Axis Bank, has decided to shorten her tenure by more than two years, the lender informed the exchanges on April 9. The decision has come amid reports that the Reserve Bank of India was unhappy with the lender’s performance and had asked the bank to review its decision to extend Sharma’s term.

Last December, the board of Axis Bank, India’s third-largest private lender, had given Sharma her fourth extension. The new three-year term was set to start from June 1, 2018. Now, the RBI’s final approval for the curtailed term is awaited.

Sharma took over the reins of the bank in 2009 after quitting the ICICI Bank group, which incidentally has also found itself under the scanner.

An IIM Ahmedabad graduate, Sharma has been credited with building Axis Bank’s investment banking and the retail businesses. The latter, in particular, helped the lender tide over a period when corporate loans had begun turning sour.

But it wasn’t all smooth sailing.

Bad loans

Over the last few years, Indian banking’s toxic loan pile has increased considerably. While it’s mainly the public sector banks that have suffered, private lenders like Axis Bank, too, have had their share of dud loans.

Under Sharma’s tenure, for instance, the gross non-performing assets of the bank have risen from 0.96% in March 2009 to 5.28% in December 2017.

The bank’s increased exposure to sectors such as infrastructure, power, and mining returned to haunt it when the economy slowed down after 2008. By the time it attempted a course correction, the damage was done.

Credibility crisis

Axis Bank has also been pulled up twice by the central bank for under-reporting bad loans for financial years 2016 and 2017. The divergence – ie the difference between the RBI’s and the lender’s assessments – was around Rs 9,480 crore, nearly one-and-a-half times the amount reported by the bank.

In financial year 2017, the lender once again reported a loan divergence of Rs 5,633 crore, denting its financial credibility in a big way.

Profits plunge

As toxic loans surged, the bank’s earnings came under pressure.

In 2016, it reported a loss for the first time in 46 quarters. Since then, despite recovery, earnings have remained below analysts’ estimates even as recently as in the October-December 2017 quarter.

As a result, its stock has under-performed, too. In the last three years, the Axis Bank scrip has lost over 7% of its value, plummeting from around Rs 570 to Rs 527 at the start of trade on April 10.

It has also under-performed at the banking index for the last three years. The share has fallen 0.1% in this time, compared to a 13.1% rise in the banking Nifty index.

Demonetisation woes

In the aftermath of the November 2016 note ban, Axis Bank once again found itself in a tight spot.

At least 19 of its employees were suspended for flouting norms and for alleged money laundering. The reported malpractices led to a series of raids by income-tax officers at several Axis Bank branches. There were even rumours that the bank could lose its banking licence. The RBI had to step in to contain the damage.

WhatsApp information leaks

In December 2017, the Securities and Exchanges Board of India ordered Axis Bank to probe insider trading allegations against bank officials. The bank came under the market regulator’s lens following reports that the lender’s earnings were already being shared on WhatsApp before it was sent to the exchanges.

This article first appeared on Quartz.

Support our journalism by subscribing to Scroll+ here. We welcome your comments at letters@scroll.in.
Sponsored Content BY 

A musical remix, a delectable dish and a taxi makeover

What do these three works of art have in common?

What connects Raghav Sachar, Ranveer Brar and Taxi Fabric? On the surface, nothing at all. Sachar is known for his genius musical abilities, Brar a chef loved for demystifying food while the essence of Taxi Fabric goes way beyond its name. All three operate, and thrive, in unconnected domains. Upon looking closer, though, a common thread emerges between their work so far - an unmistakable streak of creativity.

Raghav Sachar is a singer, composer and film scorer who was featured in a National Geographic series, My Brilliant Brain, for his prodigious musical abilities - he can effortlessly switch between male and female vocals and play over 30 musical instruments! His adaptations of old Bollywood songs, shot in a multi-screen format, have been especially well received on the Internet.

Ranveer Brar is a well-known chef who is working to expand the idea of food. He has appeared in culinary shows as diverse as Masterchef India, Great Indian Rasoi, Thank God It’s Fryday and Food Tripping. Brar’s work in food media isn’t merely instructional, he seeks to deep dive into food - to the very science of it and its endless aesthetic possibilities. Brar is also a phenomenal food stylist who approaches food presentation as no less than an art, and himself as no less than a food artiste.

Taxi Fabric is a startup that turns taxi seat covers into canvases for artists. Through Taxi Fabric, artists have found a medium to unleash their creativity and activism onto Mumbai’s roads – the iconic kaali peelis. If you get lucky on a Mumbai street, you may hop into a world of Mumbai’s chawls, surrealist Persian architecture, Chandni Chowk and more in your short taxi ride.

The latest projects from these three creatives have a connection too - the same muse, presented by Flipkart. The muse inspired Raghav Sachar to recreate one of his own songs ‘Baahon Mein Tu Aaja’. Watch his new version of the song below.

Chef Ranveer Brar, meanwhile, dipped into his food styling instinct to create a beautiful dish. You can watch his piece of culinary art below.

Taxi Fabric brought on board Arun Chanchal, a graphic designer who describes his aesthetic as geometric surrealism. Watch the stunning result of their collaboration below.

Flipkart revealed the #ExtraordinaryBeauty that launched a musical remix, a delectable dish and a taxi makeover on 20th July. Watch the reveal below.

Honor 9N is the latest in Honor’s range of beautiful, yet highly functional, phones. There’s a lot that makes Honor 9N a worthy muse - it boasts 2.5D curved glass design with 12-layer nano coating process. It, moreover, offers full-screen display thanks to its notch design. Honor 9N will be launched in India as a Flipkart exclusive on 24th July, 2018. To know more about the phone, click here. Stay tuned for the launch, here.

This article was produced by the Scroll marketing team on behalf of Flipkart and not by the Scroll editorial team.