Zarin Daruwala: All the right moves

The dull off-white window shades in the corner office are all pulled down, keeping at bay Mumbai’s harsh afternoon sun. When open, those windows overlook a not-so-common sight in the city—a lush green lawn, attached to the Mumbai Cricket Association ground.

“Sure it’s a great view,” says Zarin Daruwala, the latest inhabitant of the office of the CEO of Stanchart’s India operations. “But where is the time to enjoy it?” (She did, however, take in the view when we asked her to stand by the window during the photo shoot.)

Geographically, Daruwala has moved just a few blocks; till November 2015, when her move to Stanchart was announced, she was president of the wholesale banking business at the country’s largest private bank, ICICI, which, like Stanchart, is headquartered in Bandra Kurla Complex, Mumbai’s finance hub. But career-wise, she’s taken a huge, huge step. She’s not the first to leave a private Indian bank for a foreign one, but given the state of the bank she’s moved to, it’s an interesting move.

On the face of it, moving from a lower position in one organisation to heading another is not extraordinary; when Gopal Vittal moved from Hindustan Unilever to head Airtel, it caused some comment but only because he moved from consumer goods to telecom. Otherwise, it was seen as a logical step.

In Daruwala’s case, what queers the pitch is the industry: banking. Dinesh Mirchandani, managing partner, Boyden India, the India arm of international hiring firm Boyden, explains the issue. “There is a general disinterest both from employees and employers in the banking sector to make lateral moves within the industry in India especially when it comes to very senior positions.”

Namrita Shahani Jhangiani, co-lead of financial services practice in Asia of executive search firm Egon Zehnder, who has 16 years of experience in hiring for financial services firms, agrees that there’s a lack of interest. “A crucial question I ask senior bankers who want to move is if they are willing to shift to a bigger role in a smaller firm, as that’s where most of the jobs are. They would start with a yes but will most often end up pulling back,” she says.

Top jobs at banks are rare; HDFC Bank has had just once CEO since inception and that is likely to continue as the Reserve Bank of India recently approved a five-year extension for Aditya Puri. (The RBI has to approve the appointment of any bank CEO.) The same can be expected at other private banks such as Yes Bank and Kotak Bank. At ICICI, Chanda Kochhar could stay on for at least another decade.

The story in public sector banks is a little different. The seniors in those banks are among the most seasoned in the industry, since they are rotated among different roles in their organisation and are usually well versed in all aspects of banking. But by the time they are ready for the big job, their retirement is close. And because they’ve been so long in the public sector, they are misfits in private banks.

All of which means there’s little chance for a second-in-line to get the top spot. Earlier, in a different context, Daruwala had said that getting the top job was not the thing; the roles themselves grow bigger and more challenging and so there’s enough excitement to hang on to the existing job. Not everyone thinks like that; at ICICI itself, strong contenders for the top spot such as V. Vaidyanathan and Renuka Ramnath quit to set up their own ventures. Others, who are in a more administrative role, establish their own power centres and comfort zones within the bank. “In a way, a top job at a bank is a power trap from which it is difficult to come out,” says a former board member of ICICI, who asked not to be named.

The reason many stick on is because most banks don’t want to bring in outsiders who could play havoc with the bank’s culture. It’s an open secret in banking circles that at the heart of Axis Bank is the UTI culture (Axis Bank was formerly UTI Bank, with all the public sector connotations of UTI), which makes itself felt whenever managing director Shikha Sharma (No. 3 on this year’s rankings) tries to implement changes. Foreign banks, meanwhile, have for long been known to look only within for their leaders, fearing that an outsider will mess with their established systems and processes.

Which is why the industry was taken aback by Stanchart’s decision to appoint Daruwala as India CEO. Stanchart insiders (who cannot be named as they are not authorised to speak to the press) say it’s a bold move by their global CEO, Bill Winters. “Winters has broken a glass ceiling,” says one Stanchart executive. After all, he adds, Daruwala was not even a board member at ICICI. “It’s a move to watch.” Winters did not respond to my questions on this, though his office directed me to Ajay Kanwal, regional CEO for ASEAN and South Asia, who Daruwala reports to.

In an e-mailed response, Kanwal says: “From my perspective, Zarin brings outstanding experience from her 25 years in the industry, having led teams in corporate banking, project finance, structured finance, financial institutions, government and public sector banking.”

Stanchart seems to need Daruwala more than she needs Stanchart. For her, it’s a move up, heading a global bank’s operations. It’s also a chance to learn, as she has not had too much exposure to retail banking. But it is her corporate banking smarts that Stanchart desperately needs now. In its results soon after Daruwala took over, the bank reported a big drop in profits (profit before tax fell a whopping 84% in 2015-16), thanks to loans from previous years that turned bad and had to be provisioned for.

Poor India results hit the parent company hard, leading it to post a loss for the first time in 26 years. In a statement issued in August last year after the results were announced, the bank said: “India has faced a slowdown in economic growth since 2012, relative to the higher rates of previous years, combined with high indebtedness in some corporate sectors and lower appetite for refinancing, reducing the success of corporate debt restructurings and distribution efforts.” Pre-tax profit fell to $2.1 billion (Rs 13,265 crore) from $3.2 billion in the previous year, due to a surge in loan impairment losses at $1.65 billion as against $864 million.

Compounding a bad year was the fact that rival Citi became the No. 1 lender among foreign banks, despite having a smaller presence in India than Stanchart. Daruwala’s job, then, is to put India’s oldest and biggest foreign bank back on the rails.

Her track record is blemishless, starting right from her days as a trainee in ICICI in the late 1980s when she was mentored by Y.H. Malegam (former president of the Institute of Chartered Accountants of India, and later, member of the RBI board and head of several committees on finance). Academically brilliant—she won a gold medal in chartered accountancy and another in company secretaryship—Daruwala says that was possibly one reason for her swift rise through the ranks.

One of Daruwala’s early colleagues recalls that she was part of a team that was working to get ICICI’s account linked to U.S. accounting standards, which required her to coordinate with all the different departments. “She got the job done, but had rubbed several colleagues the wrong way and was not the most popular person around,” says the ex-colleague. That’s characteristic of the ICICI “school for bankers”, or all those mentored by K.V. Kamath. That aggression works in her favour. “She turned out to be successful in all her projects,” says the same person, who adds, “she was a perfectionist”. Malegam has a slightly different memory of his protégée. “She came across as someone who was clear about her objectives and was willing to work hard; something that made me take notice of her.”

That relentless pursuit of her goals, plus the fact that she was the go-to person for big-ticket corporate loans, put Daruwala on government committees on sectors such as power and infrastructure, both of which needed big capital and favourable policy. It’s not too much of an exaggeration to say that she was one of the more important people when it came to funding India’s growth.

Indian private banks take care of a fifth of the country’s banking needs, the bulk of which is met by the public sector. Foreign banks account for barely 5%. Further, RBI regulations do not allow foreign banks that are subsidiaries of the parent to physically expand their footprint in India. That rule ensured that foreign banks couldn’t effectively take advantage of growing incomes and grow their retail banking business.

This meant that the average low-cost current and saving accounts (CASA) at foreign banks were at just 15% compared to 40%-plus in big domestic private banks; the higher number means more access to low-cost capital. This is something foreign banks are looking to improve. Except, Daruwala has no real retail experience, and she knows it. When I meet her, she says most of her time is now devoted to studying the retail business.

Her senior executives agree; they say Daruwala has been spending long hours understanding the nuts and bolts of the retail business. One of the reasons for this urgency, apart from her almost insatiable need to know, is because of a new rule from the RBI. According to this, if a foreign bank is incorporated locally instead of remaining a subsidiary, it can behave like a local bank and expand in the same way. Will Stanchart do that? Daruwala refuses to comment on this, but does say that to her mind, such a move can be too capital-intensive for the parent, so it may not happen in a hurry.

She’s been six months on the job (she joined in April), and has already committed to grow the retail business; she has already hired around 800 people towards this. She says her prime focus is to drive up CASA, which is already over 30% of its deposits. Bank insiders say Daruwala is pushing her executives hard on the retail front, as she wants them to move from the cosy ‘satisfactory performance’ to far steeper targets. She says that the NTB (new to bank) customers have doubled over the past year but she is not happy with the performance and wants to double the levels from here.

“Retail banking offers tremendous potential for growth, given that we have the largest branch network among foreign banks in India, along with innovative digital and mobile banking platforms. We have hired 800 people in retail banking this year and will be investing $100 million (inclusive of technology) over [the next] five years,” says Kanwal. And Daruwala, with her “excellent relationships with clients across a spectrum of major and medium-sized companies, including large FIs [financial institutions] in India”, is key to growing this segment.

When Daruwala was made the offer from Stanchart, she says she was not particularly enthusiastic. Like most others in the industry, she believed that Indian arms of foreign banks were helmed by mere figureheads. Consider this: Naina Lal Kidwai became chief executive of HSBC in 2007 and later chairman in 2009, but until she retired in October 2015, she was not in charge of any business vertical. The heads of these verticals reported directly to their regional bosses. That was not the exposure Daruwala wanted. “All my life, I have been in a client facing role and it was important that I was in a business kind of a position,” she says.

A few calls with Winters gave her some clarity on the new plans at global HQ. Winters, who had recently taken over from Peter Sands, made it evident that he was going to move Stanchart away from a regional office play to a more decentralised role. In English, that means that earlier, the regional head would call the shots for the countries in that region, and the role of the CEOs in each country was restricted to liaising with the regulator and the government. Winters brought in the work culture of his previous employers, JP Morgan’s investment bank. His aim was to empower country heads and make them more responsible for the country. That clinched the deal for Daruwala.

Beyond getting this important point sorted out, Daruwala did not mull too much over the offer. She decided the time was right for such a move, and made it.

For Winters, it was a coup. He had studied the India books, and realised the big problem was in Stanchart’s corporate loan book. He needed someone with Daruwala’s profile to help the bank get back some of the monies stuck with some of the biggest industrial houses which weren’t paying them back on priority. “That they may be seeking someone to tidy up their local books did not weigh a lot in my decision to take up the job, though it did cross my mind,” says Daruwala.

In fact, even before Winters took on the top job at Stanchart, he knew the India books needed to be cleaned up. During a visit to India before he joined, at a presentation by local executives he is said to told them to skip the slide describing the Essar issue. “You don’t have to bother about this. I will handle this out of London,” he told them.

In fact, Winters was on the team of top bankers (representing banks most affected by the company’s bad loans) that encouraged Essar to deleverage its stressed balance sheet. Others on the team were Daruwala (then representing ICICI) and State Bank of India’s chairman, Arundhati Bhattacharya.

In fact, had Daruwala continued as president of wholesale banking at ICICI, she would likely have got the largest share of credit for the recently concluded $13 billion Essar Oil sale to Rosneft, which bought down ICICI’s stressed loans significantly. As we go to press, there are reports that Essar will pay the $2.1 billion it owes to Stanchart; since Daruwala was a part of the team that encouraged the sale, she’s likely to get her share of plaudits at Stanchart as well.

Essar is just one of the more egregious cases. Previous Stanchart CEOs had lent almost indiscriminately to companies that are now deep in debt and defaulting: Vijay Mallya’s various ventures, DB-Etisalat, Vedanta, and the like. Some of these loans were without collateral or even a letter of guarantee, given under discretionary powers rather than with proper due diligence. It was almost like a handbook of how not to do corporate lending.

This is where Daruwala is on solid ground. Her ability to identify potential bad loans is well known in ICICI, where she was among the earliest to flag off the bad position Kingfisher Airlines was in, as early as 2012. Based on this, ICICI sold the airline’s outstanding loans worth Rs 430 crore to non-banking finance company, SREI. “We had to do it, as we realised they were in no position to pay,” says Daruwala. Winters wants to harness those smarts to get Stanchart’s India business out of the mire it is in.

Daruwala’s immediate focus is on recovering those loans; she meets corporate customers regularly to this end, and doesn’t stress too much about drumming up new business. “Between recovering money lent by her predecessors and building the retail business, it is the former that will bring her accolades as that will clearly improve the balance sheet of the bank,” says a senior Stanchart executive.

Daruwala says she owes much to her training at ICICI, which gave her the freedom to run her business independently and take her own calls. But here’s the thing. To truly grow a bank, it takes more than the right person with the right contacts and the right attitude (all of which Daruwala has). It’s also going to need the economy to turn, for troubled sectors to resolve their issues, and other macro factors, over which neither Winters nor Daruwala nor Kochhar nor any banker has any control. But for everything else, Daruwala says, she has learnt to push past issues to get the job done.

In the six months she has been on the job, Daruwala says she’s comfortable with what she has managed. She refuses to delve into the reasons why Stanchart ended with so many lemons in its loan portfolio; she’s only concerned with making sure the damage they have caused can be minimised. “I am the kind who will roll up my sleeves and get to work rather than ponder over the past,” she says, before adding, with characteristic gentle humour, “not that I wear long sleeves.”