Not too many bankers were happy when the Indian central bank in May raised savings bank account rate by half a percentage point, from 3.5% to 4%, as this will push up their cost of money. This was the first hike in savings bank rate in the last 19 years.
Incidentally, 109 years ago, when savings bank account was introduced in India, it had offered 3.5% interest. Ahead of that, in the 1880s, term deposits were introduced with 4% interest rate on one-year deposits and 3.5% on six-month deposits. One can find these nuggets of interesting information in Banking Beyond Boundaries, a coffee table book on the history of India’s largest lender State Bank of India (SBI) by Abhik Ray, a former deputy general manager of the bank. Going beyond State Bank, the book has chronicled India’s financial history.
Also Read Tamal Bandyopadhyay’s earlier columns
SBI, in its current avatar, was born in July 1955—but its origin was in the Bank of Bengal—opened for business on 2 January 1809 in Kolkata, then Calcutta, marking the advent of modern, limited liability, joined stock banking company in India. But even before that, banking as a business existed in India and even borrowers had their ratings. For instance, the Sudras (oppressed castes) had paid 60% when they took money from sresthis, or shroffs, or indigenous bankers, who financed traders, merchants and even kings, but the Brahmins paid 24%.
The book has many interesting sepia-tainted photographs and anecdotes. I am tempted to refer to one of them. An SBI executive wanted to be excused from his mobile audit duty as he was suffering from spondylitis, and wrote to P.C.D. Nambiar, a deputy managing director who later became chairman of the bank (May 1977-December 1982). Nambiar, who knew him well, cleared the request on medical ground, but wrote a comment on his application, “Request granted, but this is the first evidence of spine in this man.” I would have loved to read more such anecdotes and skip the pages that carry photographs of SBI bosses receiving awards from ministers.
Dare to lead
Yet another book on banking worth reading is former Bank of Baroda chairman A.K Khandelwal’s Dare To Lead. During his three-year tenure—between March 2005 and March 2008—he changed the business processes; launched a marketing blitzkrieg, and crushed the once powerful employees’ union and officers’ associations. One can always say that he could do so because he was an insider and knew the bank for three decades before taking over as its chief, but not too many heads of public sector banks dare to do this. Khandelwal is one banker who depended more on his knowledge of industrial relations and human resources development than financial acumen to run the bank.
What I like about the book is how he took on the mighty unions—a lesson for all bankers in the public sector—and his candid comments on his uneasy relationship with the boss, the chairman of the bank, when he was an executive director (ED). This is a commentary on the culture of public sector banks where most often the CEO of a bank and its ED do not get along with each other.
Traditionally in Bank of Baroda, whenever a deputy general manager was promoted as general manager, the chairman of the bank used to consult the general secretary of the union before the announcement. Apparently, the bank’s former chairman S.P. Talwar, who later became a deputy governor of the Reserve Bank of India, once called the general secretary of the union and asked him to sit on his chair as he felt that the bank could have only one boss.
Khandelwal followed Talwar’s philosophy seriously. Which is why he was not scared to be posted in Kolkata to head the bank’s eastern zone operations—a traditional graveyard for banking professionals. Powerful unions did not allow any employee to be transferred from one branch to other, and even within the same branch —from one corner to other. In the 1980s, when an attempt was made for the so-called job rotation, employees went on a strike that lasted 54 days and ended with the state government’s intervention.
As an ED, Khandelwal introduced personnel audit in the bank. The bank’s then chairman, P. Shenoy, appreciated this, but kept quiet when the unions launched attacks on him, and Khandelwal had to seek the board’s intervention to protect himself. I have not spoken to Shenoy on this, but Khandelwal’s experience outlines the predicament of an ED in a public sector bank succinctly—“An ED is expected to lend support to the No. 1 in achieving organizational growth. In real practice, sometimes, the No.2 are reduced to being yes man.”
Blaming Shenoy squarely for the bank’s plight, Khandelwal has written: “I must confess that his leadership had a bearing on much of the factors contributing to the slide of the bank. His penchant for micro management and love for routine banking…kept him busy. The entire corporate office was held hostage to this routine.”
I have not spoken to Shenoy and reserve my comments, but there is no doubt that Khandelwal has highlighted a very critical aspect in the public sector bank culture where No. 1 and No. 2 in a bank often don’t get along with each other and, in the process, the bank suffers.
Graham, Buffett and me
I have also read Aryaman Dalmia’s book on investments. A student of Delhi’s Vasant Valley School, 15-year-old Dalmia wants to have a career in business and investment, emulating the lessons of Benjamin Graham and Warren Buffett. Aryaman comes from a wealthy business family, but he represents the new breed of investors who are in their teens, play market simulation games to hone their trading skills and save pocket money to buy stocks.
Tamal Bandyopadhyay keeps a close eye on all things banking from his perch as Mint’s deputy managing editor in Mumbai. Comment at email@example.com