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V Subramanian

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What is ‘Banking’?


As per Section 5(b) of Banking Regulation Act, 1949, ‘banking’ means “the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise and withdrawable by cheque, draft, order or otherwise”. 


Here the core words are accepting deposits, lending and investment’.


But how banking is interpreted today?


Many economists and seasoned bankers themselves believe that all financial services are banking and shall be undertaken by a bank without any hesitation. It is totally a wrong perception.  Because of this wrong perception only, selling of gold, mutual funds, insurance policies and other financial services like investment banking, portfolio management, selling of financial and forex derivatives etc. have nowadays been considered an integral part of banking.   Due to these, the banks have lost their prime focus and started deviating from their core banking activity of accepting deposits and lending.


Now, the threat of ‘Direct Cash/Benefit Transfer’ through bank accounts looms large and certainly, the problems of bankers will only multiply exponentially in future, leading to widespread criticism and infinite complaints from various sections against the bankers, for no fault of theirs.


All banking transactions impinge upon finance, but all financial transactions are not banking


Many bureaucrats in Ministry of Finance, top officials of RBI and CMDs and EDs of banks are under the mistaken notion that any monetary transaction may be included in banking service and banks may engage themselves in such activities, provided they are legal and profitable.  Everyone including the banks failed to see the distinction between finance and banking. In course of time, the banks who must be the guardians and catalysts of an economy have started playing the role of a servant of all others in the society.   Is a banker reduced to a mere accounts-keeper for all sections of the society?


While it is true that every financial transaction between two parties can be captured by a bank and reflected in its accounts books, the banks shall never aspire to initiate or receive each monetary transaction by themselves, even if instructed by others.


When both the parties to a money transaction remain mere witnesses, one bank executes it on behalf of its client and there is another bank to complete the other part of the same transaction. By doing this, the banks shoulder the risks of someone else.  By passing on the risks, responsibilities, concerns and potential losses to the banks, the real parties are merrily engaged in some other useful and leisurely activity.  This is the point where the banks have drifted from their main course.  


Today, the emphasis is on fee based income


Now, we see banks selling gold, insurance policies, mutual funds, collection of government taxes etc. on one extreme.  On the other extreme, we also see banks engaged in selling of Tirupati Laddus, collection of school and college fees, undertaking ECS transactions for recovery of dues of private financial institutions, distribution of interest and dividends paid by the companies through ECS, payment of salaries to staff of government departments, educational institutions and private companies and payment of various types of pension to the beneficiaries, distribution of subsidies, aids, grants and scholarships from the central and state governments and other unrelated activities like overseeing election duty and the like.  The latter category of tasks do not fetch any income or gains. 



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On the contrary, they demand a lot of time and energy of the bank staff and put great pressure on them.  Many of these functions have cleverly been thrust upon banks by others and the banks themselves voluntarily took up some of them.   In many other cases, banks have been caught in the traps laid by themselves, while going for large scale business expansion.



Bank managements do not unduly bother themselves about the impact of such activities on the precious human resources


Banks are made very happy by the pittance they receive in the form of fees, commission, incentives etc.  The banks have not properly foreseen the risks and potential loss in such seemingly innocuous service activities.  But, compared to the amount of such fees, commission or incentive received, the cost of human resources wasted on these jobs is enormous and irrecoverable.  Moreover, there are innumerable instances where the banks have been forced to pay compensation/damages on the instructions of Consumer Forum, Courts and the Ombudsman. In several cases, such operational losses have been recovered from the innocent officers too.   Such small value, but high volume transactions do not offer any scope for creativity and self-accomplishment.  There is total drudgery in most of these activities and the bank staff are exposed to fatigue, boredom and continuous stress.  Even in their personal life outside their bank (assuming they have time for a personal life in reality), these staff become dull, monotonous, drab and absent-minded.   Thus, bank staff are converted into servants of somebody else, for a worthless sum and yet taken to task by everybody ruthlessly!


Banks have made themselves cheap 

In an anxiety to play as many roles as possible, banks have failed in their prime role.  ‘Omnipresence’ itself has become the ‘Achilles’ heel’ of the banks in India.  Precisely due to this reason, bank staff have been reduced to nothing in today’s society.  They are no longer precious, respected and envied.  They have become so cheap, weak, vulnerable and defenceless that whosoever wants to insult and harm them can do so and get away with total impunity.  They have become an easy and soft target for every segment of the society.  Alas, there is no unity among the bank staff today unlike in the past.  (I don’t expect nor support militancy, but unity and group solidarity among bankers are very much necessary).


There is neither recognition nor sympathy

Because of the faulty course chosen by their managements, bank staff have to bear the brunt of the dissatisfied customers, superiors, regulatory bodies and law enforcing agencies.  The media is also very unkind to them, because of the false notion that all bank employees are well paid and pampered beyond a point.


I wish to quote one instance that is very relevant here.


When I was the Branch Manager of my bank at Ooty, I used to carry a brief case to the office every day and bring it back when I returned home at the night.  There was a lady in the neighouring house.  One day, she asked my wife: “I have been observing that your husband carries a brief case to the bank every day and promptly brings it back on his return.  What does he keep inside the brief case?  Does he bring home bundles of currency notes, everyday?”.


Why I am quoting here is, even educated people in the society think that we bankers always roll in heaps of money!  God alone knows that it is only a banker who has the largest amount of debts!



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