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A ringside view of Indian banking

Kakodkar narrates how successfully State Bank of India managers could adapt to serve the larger interests of the economy

MY 40 YEARS WITH SBI - P. G. Kakodkar; Goan Observer Pvt. Ltd., Panjim, Goa. Rs. 395.

FAR FROM being just a change in nomenclature, the formation of the SBI in 1955 — just two years before the author of the book under discussion began his career — was meant to signal the ways Indian banks would help the socio-economic development of the country. Inevitably the new organisation, at once proud of its ethos and acutely aware of its new role, had to adapt itself to the new demands in many visible and not so obvious ways.

Exclusivity, a virtue of the Imperial Bank days, naturally became a casualty as the bank strove to reach out to sections previously neglected. A great wave of branch expansion followed. SBI's pioneering role in financing agriculture and small-scale industries as part of a broad-based development banking effort has been very well commented upon.

A global pioneer

It was a learning experience for every one — lending bankers, borrowers, and government agencies. That commercial banks could lend at all and that too on a viable basis to small scale units and the farm sector was a revelation. SBI was truly a global pioneer in these areas.

Of course, none of these would have been possible without the active participation of the staff. The Imperial Bank and its successor could boast of enormous talent. Mr. Kakodkar's narration of the bank's several development schemes shows how successfully its managers could tune themselves to serve the larger interests of the economy.

Today's debates on the role of bank finance for SMEs may sound novel but at least three and a half decades ago the SBI had provided the structure for such an initiative.

Social banking era

Very soon SBI along with other banks had to resort to social banking which to many people appeared to be devoid of any commercial element. Its approach was to create an "Innovative Banking'' department to undertake elements of the 20-point programme of the emergency days. Needless to add that this required special orientation on the part of those implementing the various schemes. The early practitioners of such unorthodox banking may be gladdened by the fact it has since become mainstream.

In the traditional areas of deposit -taking and lending too SBI had to be innovative in a different sense. Blessed as it was with government deposits, there was an unfortunate tendency among its officials to treat deposit taking as a secondary activity, certainly not as glamorous as the lending functions. Mr. Kakodkar was among the first to tap the potential of this segment. It is here — now called personal banking or retail banking — where the first standards of customer service were set.

Also, SBI realised the potential of using its celebrity-employees to market its products. Ajit Wadekar, a former Indian cricket team captain (who rose to become a senior officer of the bank) was actively associated with hugely successful deposit mobilisation efforts by some of the Bombay Circle branches. At a time bankers were only selling products — there was no conscious effort at marketing — SBI went ahead to fashion products such as "SBI comes to the class room'' where bankmen literally went to schools to collect deposits.

The saga of computerisation in Indian banking is well narrated. The ubiquitous "fully computerised " branch of a public sector bank had seemed a distant dream not long ago, fiercely opposed by bankmen.

Two blots

In 1975 came the emergency. In a chapter entirely devoted to the subject, two incidents stand out: one, the removal of an outstanding chairman and the second, the bizarre Nagarwala episode. The iconic R. K. Talwar — revered to this day — had to go because he resisted sanction of an additional loan to an unviable unit promoted by a crony of Sanjay Gandhi. The SBI Act had to be amended to ease him out.

The Nagarwala episode would have been laughable but for the serious breach of rules and regulations it entailed. That a con man (Nagarwala), mimicking Prime Minister Indira Gandhi's voice, could walk away with Rs.60 lakhs after convincing senior head cashier Malhotra that he was on a secret errand, should be beyond the imagination of most crime fiction writers.

Yet that is precisely what happened. The reason why the basic checks and balances broke down has been attributed to sycophancy that prevailed in Delhi those days. Although most of the money was recovered and official enquiries including a judicial one upheld the veracity of what was claimed, doubts still linger. Both Nagarwala and the police superintendent investigating the case met with untimely death. The mystery naturally deepened and as Mr. Kakodkar's description of the episode shows, even an insider's view will not quell deeply ingrained scepticism about the official version.

At the start of financial liberalization in India, SBI's image took a severe beating in the form of the securities scam in 1991-92.The bank took most of the blame although more balanced reviews subsequently held that it had been made a scapegoat. Whatever the truth, a number of senior officers lost their jobs, a few went to jail and the morale of a much larger section of its staff went down. Even the Joint Parliamentary Committee was to hold the foreign banks as the principal perpetrators. Yet it was the SBI, along with a few other public sector banks, which bore the brunt of official inquisitions.

The message ought to be clear: there are different sets of rules for private and public sector banks .The difference goes all the way to the support systems the organisations extend to those who have acted in good faith. It is not at all surprising that some of the top foreign bankers have bounced back in style, while lower level employees enmeshed in one legal case or the other are stoutly defended by their employers. One expected Mr. Kakodkar to explain why public sector bank employees are treated so harshly even where the magnitude of alleged malfeasance is far less. Maybe he will do it in another book or an article.

A book for wider audience

P. G. Kakodkar joined the State Bank of India as a probationer in 1957 and retired as chairman of the group in 1997.

Quite unusual for a banker, especially one from the public sector mould, he has put down his experiences of four decades in the financial sector in the form of an autobiographical narrative. There are reasons as to why the book recommends itself to a much wider audience than just bankers, although the recent launch function in Chennai appeared to be an in-house affair with the audience made up almost entirely of SBI staff. It would be a pity if the readers too — hopefully a large number from outside banking — miss the main theme of the book which, despite its first person narration, is really about issues weightier than those connected with the career progression of one individual all the way to the top of the biggest bank in India.

Although there are several anecdotes related to SBI, subjective statements, the usual runins with some colleagues and plenty of support from others, Mr. Kakodkar has not written this book with a view to settling scores with or recording his gratitude to former colleagues, many of whom are probably not alive. Rather, the book is on recent Indian economic history with the focus on the financial sector.

Mr. Kakodkar's 40 years with the SBI have been a momentous period not only for Indian banking but for the country's economy as well.

An autobiographical piece like this one cannot but capture the momentous changes that inevitably left a mark on Indian banking.

C. R. L. NARASIMHAN

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