Andy Mukherjee is a Bloomberg Gadfly columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.

When bankers start worrying more about what they’re lending against than what they’re lending for, things usually get exciting for a while, then end badly. That adage has kicked Standard Chartered in the teeth in India, where, according to Bloomberg News, about $5 billion of its loans are on an internal watch list.

A clear test for Zarin Daruwala, named on Tuesday as the bank’s new country head in this key developing market, will be whether she can steer the lender away from the mess that lumpy loans to company owners backed by shares of ephemeral value have left, and repurpose the franchise as a financier of operating businesses. Shifting the focus from collateral to cash flow, in other words.

Hers will be a boring undertaking. Where's the fun in wearing a hard hat and trudging through petrochemicals refineries and dusty coal mines, when one could as easily hobnob with the mega-rich over golf and write a few large checks to the holding companies of their operating assets?

But for the sake of Standard Chartered’s global CEO Bill Winters, who’s cutting thousands of jobs and raising billions of dollars in capital to steady the floundering emerging-markets lender, Daruwala must deliver on the boring-banker routine. As Edward Evans wrote in his Gadfly column two weeks ago, Winters is only slowly generating funds. The last thing he'd want is for his India CEO to blow them on yet more big-ticket risky bets in an economy still not firmly on its feet.

Stalling Growth
Standard Chartered's franchise in India is struggling to expand
Source: Company filings compiled by Bloomberg
*Data for 2013 and 2014 are for South Asia

In theory, Daruwala can pull it off.  She surely has the credentials. The corporate banking division she ran at ICICI has annual revenue of about $5.5 billion, almost three times the size of Standard Chartered's operations in South Asia last year. The business cycle is also on her side, with bad loans in the banking system peaking. If global commodity markets stabilize, Daruwala may be able to claim a successful turnaround by this time next year.

That would be a much-needed win for Winters, who requires all the victories he can get to reignite the stock, down 70 percent from its November 2010 peak. The bank's woes are partly because of hefty regulatory fines and partly the result of a China-led economic slowdown. But mostly, they 're a consequence of the lender’s own errors of judgment, especially in emerging markets.

Daruwala's Challenge
Standard Chartered's loan losses are crimping profitability
* Data for 2013 and 2014 are for South Asia

Take Essar Group, a power, steel and oil-refining empire controlled by the billionaire Ruia brothers. So debt-fatigued is the conglomerate, and so distressed its businesses, that Standard Chartered, along with other creditors, is shopping some $3.5 billion of loans around in an attempt to limit its exposure.

Things won't remain this downbeat forever. Essar's lenders won't have missed group Chief Executive Prashant Ruia's cheery tweet about improving profitability at the company's refinery business in the September quarter.

Still, it would be too much to imagine Daruwala making Winters's problems in India go away in a hurry. She's taken a career risk by joining a dispirited organization, even though it's unlikely Standard Chartered will exit the country where it's been present since 1858. Rather than a magic wand, the new India head needs a measured approach. With some luck, the rest should fall into place.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Andy Mukherjee in Singapore at

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Katrina Nicholas at