A saga ends in India’s cradle of banking

Udupi: When a daughter is married, we do worry about her future. But why should I worry when the government of India is my son-in-law who married my daughter Syndicate Bank,” asked the late Tonse Madhav Ananth Pai in 1969, in the aftermath of the nationalization of the first-generation private-sector banks. Fondly known as “Brahma of Manipal”, Pai was the founding father of Syndicate Bank in 1925.

This incident was recounted to Mint by Ashok Pai, the youngest son of T.M.A. Pai. “I was young and foolish, I did not know the philosophy behind his statement but soon enough I was able to fathom the depth of my father’s reply to a journalist in 1969,” said Ashok Pai. In the new wave of bank mergers announced by finance minister Nirmala Sitharaman on 30 August, Syndicate Bank will now be merged with the anchor Canara Bank. In short, Syndicate Bank will cease to exist.

The Udupi-born Corporation Bank will also lose its name. Founded by Khan Bahadur Haji Abdullah Haji Kasim Saheb Bahadur in 1906, it will be merged with Union Bank of India and Andhra Bank. Last year, another local bank, Vijaya Bank, which was started by the Bunt (landowners) leader A.B. Shetty, was merged with Bank of Baroda.

So, Canara Bank is now the lone public sector bank standing in the region that has been dubbed the “cradle of banking”. Before they were bifurcated in 1997, the Udupi and Dakshina Kannada districts had birthed five banks. Four of them were nationalized commercial banks—Syndicate, Canara, Vijaya and Corporation Bank. All these banks were initiatives of private individuals, highly motivated for community welfare.

The fifth bank, Karnataka Bank, is still in private hands.

This second wave of bank mergers in August has rocked this “cradle of banks” more violently than the bank nationalization did in 1969. The undivided Dakshina Kannada district has always shown great concern about anything to do with its banks. The district raised the loudest protest when nationalization happened. In 2017, when Vijaya Bank, along with Dena Bank, was merged with Bank of Baroda, there were widespread protests. The district also experienced a partial bandh, but it was dubbed as a “panic reaction”.

As things stand, there has been a mixed reaction to the massive changes. While customers are seeking more clarity, there’s muted resentment given that this area has traditionally been supportive of the ruling Bharatiya Janata Party (BJP) government at the Centre. Some opposition political parties are planning protests. And of course, many bankers and their families are upset and even perplexed at the development.

Mixed reaction

Take N. Santhosh Hegde, the former Lokayukta of Karnataka, who belongs to a family of bankers. “I am not a banker or a financial wizard, but I am proud of the banks that our district has contributed to the country. I feel sad that the banks I held in high esteem may not be known for the next generation, their names will be wiped out,” he told Mint. “This banking industry has also spurred social empowerment as well as spirit of industry, trading and entrepreneurship in the region,” he added.

Many examples are cited. For instance, Corporation Bank founder Haji Abdullah’s family donated vast expanse of land in the heart of Udupi town to open the largest women and children’s hospital and maternity hospital that serves lakhs of poor patients under government health schemes even today.

Similarly, Canara Bank, which had humble beginnings in a village in Mangalore city, started educational institutions. It started the first high school for girls in 1891, when girl education was a taboo, paving the way for Mangalore’s interest in the world of education.

“All these banks were not growing, their NPAs (non-performing assets) were high, they needed capital…so this step had become imminent,” said Mohandas Pai, the former Infosys man who is heading Manipal Global Education Services, who feels a bank headquarters doesn’t hold any special advantage. “Yes, there used to be some advantage in the case of recruitment for the local youth. But now all the recruitment is being centrally done. The region should not grudge it for losing links with the banks it gave birth to, but move on,” he advises.

During the last 20 years, Syndicate and Vijaya Bank had shifted their corporate offices to Bengaluru, while retaining truncated head offices in Mangaluru and Manipal, respectively. Only Corporation Bank still holds its headquarters in Mangaluru, which will now be a regional office of the amalgamated entity. Chairpersons and executive directors of all the three banks (barring Corporation Bank) now sit in Bengaluru corporate offices.

A rich legacy

Needless to say, the People of Dakshina Kannada are attached to the banks that were born here. The late N. K. Thingalaya, former chairman and managing director of Syndicate Bank, had listed out some of the achievements of the local banks during a lecture to students of Nitte School of Management. “While Vijaya Bank championed the cause of farmers by extending banking and loan facilities for the agriculture sector, Syndicate Bank had pioneered micro-savings and micro-financing right from its inception. Canara and Corporation banks have to be credited for inclusive banking which was inbuilt in their repertoire,” he was quoted as saying by a senior faculty member of the school.

The spirit of private enterprises and community involvement were the two main factors why the two coastal districts (Dakshina Kannada and Udupi) could give birth to four national banks and one old-generation private bank. While Canara Bank and Syndicate Bank were promoted by Konkani speaking minorities, Vijaya Bank was promoted by Bunts (landowners) and Corporation Bank was a joint effort of Hindu-Muslim communities. That was a golden era of people-bank cooperation.

Founders of all banks in Dakshina Kannada had kept close contact with every depositor. Times were difficult there were no big industries. Given that commerce was driven by bidi-making, tiles, fisheries, agriculture, small business and trading, the banks built up wealth of the district by promoting thrift and meaningful spending. As a rule, these pioneer bankers sustained the habit of savings by involving the depositors and borrowers in the growth pattern.

In fact, the iconic “Pigmy deposit scheme” designed by Dr Pai was the first step the country had taken in small-scale savings, which was later replicated by India Post in its saving scheme and few other banks. Presently only Syndicate Bank retains the Pygmy savings scheme and collects over ₹2 crore per day all over the country. In fact, this was also the first “business correspondent” model of the country, say former bank executives.

When the inclusive banking concept dawned on the nation recently, bank officials here had almost no work on this count as 95% of the people already had bank accounts. “The five per cent of the people were migrants in the undivided Dakshina Kannada (Udupi included),” says Prashanth Shenoy, former area development officer of Canara Bank. All the four banks had developed close connections with their account holders. “I remember my parents used to call Canara Bank ‘Amgele bank amgele branch’ (our bank our branch in Konkani),” says Radhakrishna Bhat, a third-generation customer of Canara Bank.

Three banks—Syndicate, Canara and Corporation—have built museums of their founders. Smriti Bhavan: Dr. T.M.A Pai Museum is in Manipal. Haji Abdullah’s museum is in Udupi, and founder of Canara Bank Ammembal Subba Rao Pai has been enshrined in the founders’ branch in Mangaluru. Haji Abdullah’s museum has been dedicated to numismatics, and it’s coin collection dates back to 2,400 years ago. Jayaprakash Rao, who is the curator of the museum, said the bank had decided to have this coin museum as coins and banking are closely related.

The road ahead

The banking pundits have already made their calculations. According to the preliminary estimation, the amalgamated entity of Syndicate Bank and Canara Bank will have a total business of ₹15.2 trillion. It will be the fourth-largest bank in the country with 10,324 branches. It will be closely followed by the amalgamated entity of Union Bank of India, Andhra Bank and Corporation Bank, with a total business of ₹14.6 trillion and will command 9,609 branches.

“All that is fine. But will the Canara-Syndicate bank keep their best practices? Like the Pygmy collection, lending to rural development, micro-financing the customers who have admired the social service role the banks have played even after the nationalization,” asks Devanna Kukkian, an activist who is also the leader of the anti-amalgamation group.

The experts are sanguine. Prof. G.V. Joshi, a former member of the Karnataka Planning Board and an economist, says mergers of financial organizations were happening right from 1960. That year the Reserve Bank of India had given a call to the smaller banks to merge with the bigger banks. At that point of time, all the then major private banks—Vijaya, Syndicate, Corporation and Canara—had taken many smaller banks from all over the country under their umbrella. “So, we should understand that national bank merger in the changed global economic system is no more a regional or sentimental issue,” he said.

Prof. B.M. Kumaraswamy, an economist who specializes in rural banking, makes a similar argument. “India needs to have a global bank to be a big player in the world. Look at China, the top four banks among the top ten in the world belong to it. At this juncture, we must let go of our regional and local passions about our banks and adjust our needs to large banks. I still feel that the bank merger was the safe bet, but perhaps the timing was wrong,” he said, adding that a similar sense of loss of the local image of banks has happened in the past with, for example, State Bank of Mysore and State Bank of Travancore.

During the great depression of the 1930s, when the Krishna temple of Udupi did not have funds to hold the “Laksha Deepotsava” which needed huge volumes of oil and ghee for the occasion, it was Haji Abdullah who opened his warehouses and supplied ghee and oil for the temple. This spirit of what can be called true “universal banking” defined the banks of this region. In an India that is trying to change many things in a hurry, a slice of that history will be lost forever.

M. Raghuram is a freelance journalist based out of Mangaluru.