Demonetisation: Slowdown in demand temporary, says Arundhati Bhattacharya

Like the government, SBI chief Arundhati Bhattacharya urged people to look at long-term benefits of the move


SBI chief Arundhati Bhattacharya expects demand to come back in a few months. Photo: Mint
SBI chief Arundhati Bhattacharya expects demand to come back in a few months. Photo: Mint

Coimbatore: The slowdown in demand that India has seen following the government’s demonetisation move is temporary, said State Bank of India chief Arundhati Bhattacharya on Thursday.

“The demand has not gone away. Things are getting worse, but they will get better. The reason for that is the demand is there. Your demand for food stuff, your demand for steel for building a house, your demand for cement for creating a road, none of that has gone away. You have kept it aside temporarily,” the chairperson of India’s largest lender said at Sadhguru Jaggi Vasudev’s Isha Foundation’s annual leadership workshop in Coimbatore.

The SBI chief expects demand to come back in a few months.

“We would like to think that maybe maximum it should take three or four months for people to turn around and get on with life,” she told young entrepreneurs and seasoned corporate veterans at the workshop.

Bhattacharya said it was not abnormal to see people holding back from spending on non-essential items after the Narendra Modi government rendered existing Rs500 and Rs1,000 denomination notes invalid.

“Initially there will always be a phase when people are shocked. The sheer shock of it will make people stop and think. But today I can tell you, the moment your 500 (rupee) notes flood the market, much of this stoppage of spending will go away. Because (then) people will have that comfort,” she said.

Some customers are putting their spending plans on ice merely to avoid the inconvenience, she added.

“One of the reasons for the stoppage (of spending) is the missing middle. Between 100 and 2000 (rupee notes), there is a big gap. We need to fill that up. And the 500s have started coming. So that will help... And the second is the non-cash model. People will adopt it. As you keep pushing them towards it, people will adopt it,” said Bhattacharya.

Also Read: Will demonetisation end India’s housing market resilience?

Like the government, Bhattacharya urged people to look at long-term benefits of the move.

“Well, demonetisation, if you take it to its extent that you continue to try and ensure that more and more of the business is done through digital or electronic channels, that’s going to be a very major plus in the long term. Really a big plus because our economy is too cash-oriented. As you can understand, cash leaves no footprint. The more the cash in our society, the more is the corruption,” Bhattacharya said.

“If you want less corruption or a corruption-free society, you need to necessarily move out of cash. If you give them the liberty of using cash, they will abuse that liberty and ensure that they are not even paying taxes on whatever they are doing in cash,” she said.

While India “can’t be cashless”, there is need for only a “small” segment to transact in cash, she said. She also urged fellow Indians to bear with the pain in the short term for long-term gains.

“In the absolute near term, yes there will be a slowdown. There has got to be, because people are readjusting their entire models. Any kind of readjustment means a slowdown in other activities. But I think it is well worth the short-term pains,” Bhattacharya said.

The first woman boss in SBI’s 211-year history and the first-ever SBI chief to get an extension after the age of 60, Bhattacharya told the audience that she had another first to her credit.

“I am probably the only person in the entire banking industry that has seen two demonetisations,” said Bhattacharya, who was merely “three months old in the bank” when the first one happened.

“I don’t think there is any other banker who can say this because everybody must have retired. Because I got an extension, that’s why I am still around,” Bhattacharya said, with a smile.

She also used SBI’s top management’s reaction to the demonetisation move as case studies to help young leaders understand how to deal with unforeseen circumstances.

Also Read: Demonetisation: The good, the bad, and the ugly

“Those people who work within zones of comfort invariably never succeed. Growth happens only with some pain. So you have to move out of your zone of comfort in order to achieve. If you have been doing that regularly, then you get into a habit of fielding these unusual ‘googlies’ that are suddenly bowled at you, and sort of innovate as you go along.”

Like many, Bhattacharya was entirely clueless about the potential announcement when she was asked to assemble in a RBI conference room late on 8 November for the demonetisation announcement.

As soon as she came out of the room (which had no connectivity) at 9:15pm, she called the head of retail banking and asked him and his deputy to come to her house for a late-night meeting, which lasted until 11:30pm, to discuss how the bank should react to this move.

“We tried scenario building. What would be the things that would be required and who would be the best people to actually understand this.”

They then used WhatsApp groups to spread the word within the bank.

“We started sending messages on WhatsApp on what would be required the next day, how will it all pan out,” she said. “But there were a large number of things we had to keep innovating on as we went along,” she added.

There were many unknowns at the time.

“We had not imagined the difficulty of (recalibrating) the ATMs because we had never seen those (new currency) notes,” Bhattacharya said. “We got to see them only the next day. I had no idea about the dimensions, the thickness or the fact that we will need recalibration. All this was new to us.”

It is important for organisations to be nimble and for leaders to communicate effectively in times of crisis, she told entrepreneurs in the room who are at the workshop aimed at helping small businesses scale up. “The fact of the matter is we are a very large organisation, but we are still quite a nimble organisation. Because there are these layers, these span breakers, where the controllers are in charge of certain things, as we go from one span to the other, if you send one message, it goes to the entire bank, maybe in the space of an hour or two. Therefore it was much easier for us actually to get people working on the entire exercise quite seamlessly,” she said.

Also Read: Govt tells SC: Demonetisation undertaken to increase digital payments

Bhattacharya also used the opportunity to highlight the role SBI has played post demonetisation.

“Today, though our branch network is only 13% of the entire bank network, in the demonetisation amount, we have actually done 30%. One third of the entire part has been done by SBI alone.”

But the move was not as hard to implement as it would have been a few decades ago.

“If you are able to communicate fast and if you are able to communicate correctly, then marshalling your people for any such thing actually becomes much much easier,” she said.

Bhattacharya said the rise of technology has made it easier for people to react to situations like these.

“If you are not able to get that communication through seamlessly, then the communication changes as it goes from layer to layer, and then your implementation becomes pretty weak. Today, with technology, it has really become much less of a challenge than it was when I used to be at the (cash) counters. In the first demonetisation, I was sitting at the counter. Those days, by the time the thing (message) would come to us, we would be all over the place. But today that is not the case.”

READ MORE