Mumbai: Sumant Kathpalia’s elevation as the CEO of IndusInd Bank comes at a critical juncture for the bank.

From an investor’s point of view the bank’s stock is at its lowest value in three years as concerns over its asset quality particularly its corporate loan book weigh, coupled with a weak macroeconomic environment, which has made business difficult. Kathpalia, 55, has spent his entire career in retail banking starting with foreign banks like Citibank, Bank of America and the erstwhile ABN Amro before building IndusInd’s retail banking portfolio from the ground up.

This transition from retail banking to managing a bank with 46 per cent of its loans in corporate or commercial banking will be Kathpalia’s primary challenge, former colleagues and analysts said. “How he gets his arms around the wholesale business will be the thing to watch out for,” said one former ABN Amro colleague who is now with a rival private sector bank.

“What strategy will he use to grow the business, how will he make contacts and how he keeps his flock together after some senior executives leave is the first challenge for him,” the person said. Suhail Chander, the current head of the bank’s corporate and commercial banking has already moved to a less active role and is likely to retire soon.

His exit means that Kathpalia will lose an experienced head who built the bank’s corporate book at a time when stress is still visible. In the quarter ended December 2019, the bank added Rs 1,945 crore in non performing assets (NPAs) which included loans to a travel company, most likely Cox - Kings at Rs 282 crore, a diversified corporate group Rs 250 crore and a paper company Rs 177crore, re-igniting investor concerns on the bank’s asset quality. Kathpalia declined to comment for this story. The fact that these NPAs come from wholesale banking make it all the more important for IndusInd to have strong heads to manage corporate banking and risk management. Kathpalia may like to bring in new people who he is comfortable with at key posts, said Mona Khetan, analyst at Reliance Securities.

“With a change in guard at top, one could expect some rejigs at the senior management level, akin to what happened at Axis Bank,” Khetan said. However, it is important for Kathpalia to ensure continuity with the talent that is already there within the bank, his banker colleagues said.

“Chander knows that portfolio inside out and he had enjoyed the full confidence of Romesh Sobti.

With his likely exit, it is important for Kathpalia to have a strong hand at the helm especially as two other veterans Paul Abraham and chief risk officer K Sridhar have also moved out,” said another former colleague who had worked with Kathpalia at Bank of America and is now a senior executive at a private sector bank. Then there is the challenge of ensuring the smooth transition for Bharat Financial Inclusion (BFI), whose acquisition was completed in July 2019, especially with regards to getting liabilities from the franchise. Analysts have already set the task out for Kathpalia.

“Retail banking over the years has done very well particularly on the assets side.

There has been some gap on the liabilities side as there were issues like high concentration of top 20 depositors.

Sumant particularly plans to address this…,” said Suresh Ganapathy, analyst at Macquarie Capital Securities. These challenges come even as the Indian economy is in the midst of a slowdown with the savings rate falling and people moving away from bank deposits.