IDBI Bank: Turnaround and Transformation

During 2016–18, IDBI Bank faced a crisis that threatened its survival. The crisis was driven by several key issues: inadequate risk management and weak internal controls, a huge surge in NPAs, non3 compliance with Priority Sector Lending regulations impairing overall performance. Consecutive losses prompted the RBI to impose strict operational restrictions, while credit rating agencies downgraded the bank. In response, the Government of India decided to divest and transfer a controlling stake to LIC. This transition raised concerns among employees, particularly regarding job security, prompting some unions to file lawsuits in the High Court and Supreme Court contesting LIC’s acquisition. To address these challenges, in 2018, the government appointed Rakesh Sharma as the MD & CEO of IDBI Bank. Known for his banking expertise and experience with bank turnarounds, Sharma implemented a series of strategic interventions to revitalize the organization over his two tenures. The case explores IDBI Bank's background and the challenges Sharma faced in leading the transformation. As his second term approaches its end in March 2025, the case concludes with a strategic question: how to maintain momentum and position IDBI Bank among the top three private sector banks in the country in efficiency parameters?

Learning Objectives

1. Appreciate how factors such as the inability to unlearn old practices and approaches and the lack of adaptive learning (reflected in poor risk management and weak internal controls) can lead to organizational decline.
2. Use the Switch framework to recognize the contributors that drive a bank’s successful turnaround and transformation.
3. Examine effective approaches to influence key stakeholders and build trust and credibility.
4. Appreciate the significance of organizational alignment in achieving enhanced performance.
5. Learn the critical steps to maintain the momentum of transformation over time and institutionalize change
6. Analyze the leadership characteristics of transformational leaders.