Banks in India at Crossroads – A Bird’s Eye View
By Dr Sarbeswar Mohapatra
Can we think of socio-conomic development of any country without the banking systems? Banks constitute the cornerstone of development in any economy. Prior to the 19th July 1969, banking in India was confined to an exclusive club of the elites. Common man had never had a dream of banking.
On the 19th day of July 1969, 14 major banks were nationalized by the then Prime Minister of India Indira Gandhi through promulgation of an ordinance, which was later ratified by Parliament to be an Act after receiving the assent of the President of India.
State Bank of India (SBI), which was the successor of “Imperial Bank of India,” had come into existence with a new logo and renewed vigour with effect from 1st July 1955, on the recommendation of All India Rural Credit Survey Committee.
The second tranche of six major Private Banks was nationalized on the 15th April’ 1980, thus taking the number of nationalised banks to 20, apart from SBI and its seven Subsidiaries(Associates).
These actions of the Government of India opened new vistas of banking for the common people. Mass banking has taken the pivotal position over and above ‘Class Banking.’ In a phased manner, various people-oriented schemes were rolled out by successive governments- both at the Centre and states, implementation of which was thrust upon the bankers.
Bankers, as benevolent servants of the nation, became catalytic agents of nation-building by delivering the fruits of the developmental schemes at the beneficiaries’ door steps. Then, Regional Rural Banks, with respective sponsor banks’ mighty came into being and grabbed a relevant portion of Rural Banking from the public sector banks. All such efforts taken by the Government to wipe out the existence of the moles in the form of village touts and money-lenders who ensured continuance of Rural Poverty in order to gain from the piquant situation of poverty-stricken Rural Masses/ Urban Poor.
In the early 1990’s, the concepts of liberalisation, privatisation and globalisation (LPG) were ushered in with the slogan “Opening of Indian Economy to attract Foreign Investors in India and vice versa “were steps towards making the entire World a boundary-less, Global-village. This also gave rise to the emergence of as many as half a dozen private and new generation banks under the aegis of important corporate groups. Those, being techno-savvy and nimble-footed, showed their shine and kept most of the PSBs at bay. The journey from “hegemony to struggle for survival” became the need of the day for PSBs. Commercial Banks, particularly strong Public Sector ones, were allowed to open their own Bank Assurance, Mutual Fund and other business-related verticals. This has helped them increase their other “Non-interest Income,” thus boosting their bottom-line.
But banks, with the passage of time, quietly deviated from their traditional role of banking in search of other profitable avenues/ventures. This threw open a big challenge to the traditional/age-old Insurance Companies, resulting in loss of their business to a great extent. The thumb rule of “survival of the fittest” is also applicable to PSBs. Amalgamation and consolidation of weak PSBs with the stronger ones took place recently, reducing the number of PSBs from 27 to 12. Of course, of late, many new Generation Banks became the victims of Merger and Acquisition (M&A) due to unplanned, unstructured, aggressive strategies adopted, albeit the attrition of some Senior Bankers from PSBs happened (for Greener Pastures). This formula had also spread its wings for consolidations of many RRBs. Seven Associate Banks of SBI are now history. Another bunch of PSBs are on the verge of losing their identity through merger or by going private. Ignoring the ups and downs in the Banking scenario in India, many small Financial Banks and two Private Banks have, in the recent past, been given License to operate in India. More and more Business Conglomerates are aspiring to have their own Banks. Does it not nullify the very purpose of having a strong Banking sector of International standard? It is like tearing the dress by the left hand and stitching it by the Right hand, thus paving the way for a semblance of strong Banks in due course. It is left to all our Leaders and Bureaucrats to have a relook at the on-going creation/approval for new Small Financial Banks. Again, there will be loopholes and alibies and some of the new Small Financial Banks will either disappear or go into history. The plight of the people having deposits in Co-op Banks is not unknown. Wrong decisions will again and again bring insult with injury to the Banking system. The ultimate losers/ sufferers will be the poor depositors at large. Ponzi Schemes/ Chit Funds are the glaring examples of the height of fraudulent activities. Huge amount of public money was swindled by few greedy, flyby-night Operators. The resultant effect was a total breakdown of “Financial Administration and Control” mechanism.
Unfortunately, everyone across the country, for reasons unknown, is against the bankers. To be honest, if anyone is deeply hard-pressed in any of the core service sectors in India, it is only and only the banker. Heightened customer demands, cut-throat competition among banks, false and frivolous complaints either by Customers or jealous colleagues, fear forCVC/CBI/ RBI/ Govt./IBA and such other Agencies is very common. On the other hand, Banks in India have been reeling underthe carriage of historical baggage of NPAs, Frauds, and promotional aggrandisement attitude of Senior Executives, thereby demotivating a large number of deserving candidates. The policy on NPAs/Recalled Assets and Write-off enunciated by the Management has killed the killer’s instinct in the conscientious operatives. This process has been, over the years, signaling an adverse loan repayment climate across the Country, resulting in huge losses to the Banks.
A few suggestions:
1. Let the RRBs be given exclusive Rural Banking or be merged with the Sponsor Banks to ensure efficiency in both the RRBs and the PSBs.
2. Co-Operative Banks need to be effective at the level of Management, Recruitment of Staff, Customer Orientation, Public Relations and need to be totally mass-focussed.
3. NPAs need to be contained in a more efficient manner. The complicity of staff needs to be audited.
4. Vendor selection and control to be made more effective and efficient.
5. Promotion policy/process of Staff to be transparent. Employees/ Officers have to be given the opportunity to defend themselves in the case of alleged professional misconduct.
6. A Banking Tribunal at State Level is the dire need in the present context.
7. Customer-Centric Schemes have to be formulated and then launched.
8. Staff Welfare activitiesare to be reviewed and ramped up. A suitable system is to be put in placeto address the growing staff dissatisfaction/disaffection.
9. With the induction of more Women staff in Banking Sector, stricter rules must be framed to save Women Staff from sexual harassment. An Audit wing has to be in place to verify/ certify about the correct and strict implementation of the rules in this regard.
10. Errant bosses should be identified and punished both financially and career-wise…in progression too.
11. In fine, individual Bank Boards have to be empowered to take decisions without Govt. intervention on rudimentary issues. Political intervention has to be kept at zero level. Of course, Control and Supervision haves to remain with RBI , Central Government and other relevant Agencies with a view to having a transparent, efficient and accessible Banking System in India.
The Central and State Governments, Finance Department, RBI, IBA, IIBF, Banking Selection Board and all other Institutions responsible for development of the Banking Industry in India, need to give a sincere thought to this burning issue and bring about a decent operational structure, so that our Generation will bequeath a sound Banking System to the Posterity.
