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Indian Banking At Cross Roads ?


Rajesh Goyal 

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Latest Economic and Political Scenario :   The latest political and economic scenario in India indicates :-

(a) Change in the central government with a likely to bring much tougher NaMo as new Prime Minister,

(b) the report of the the Committee to Review Governance of Boards of Banks in India (P.J. Nayak Committee) is pending for implementation,

(c) Banks are facing all time high NPAs, 

(d) central government is finding it extremely difficult to bring in additional capital for PSU banks, which is absolutely necessary to meet international norms and keep them to grow. 

All the above factors are likely to have great impact on Indian banks and these have brought banks, specially PSU banks at the cross roads.   There seems to be extreme divergent views as to how to handle the above scenario. 

In addition to above, as on the date of writing this article (21st May, 2014), 

(i)                 the fate of RBI Governor is uncertain (media is hinting that he may be asked to go packing by Modi government),  

(ii)               (ii) nobody is aware who will be our Finance Minister after the swearing in ceremony to be held on 26th May, 2014.  (Interestingly, as I was searching some news, I came across a page under Finance Ministry (Financial Services), which still lists Mr Pranab Mukherjee as the Finance Minister of India, although he became President of India in July 2012 – i.e. almost 2 years back.   Here is the link of the screen shot taken by me on 20th May, 2014).   This mistake may be considered as a small  oversight, but it certainly reflects poorly for the Finance Ministry, whose incharge had been boosting of high growth in the country but  was not ready to even discuss an honourable wage revision for bankers.


Rudderless Banks :

Our PS Banks are at present headed by people who owe their allegiance and / or appointment to the Government which has been just thrown out by vibrant Indian democracy.   In view of corruption and nepotism in majority of the top appointments in banks, especially at General Manager and above levels, they do not have guts to take on the new challenges thrown by the present political and economic scenario.   They are rudderless.  They are waiting for the new political waves to show them the path to safety.   A tough Prime Minister and a clean Finance Minister at the Centre will certainly send shivers in the spine of most of the top management of the Banks as they have till now survived on buttering of their bosses rather than capabilities.

In the middle and lower level in banks, there is a large scale disenchantment among officers due to various factors like

(a) low salaries as compared to government sector; 

(b) long working hours; 

(c) promotion to undeserving officers who inspite of poor knowledge have been promoted on account of their outstanding rating in sycophancy; 

(d) missing of mid age experienced officers; 

(e) promotion to juniors to Scale III or Scale IV levels with experience of less than 8 years or so resulting in poor credit sanctions and monitoring of branches etc. etc.  

With huge number of officers retiring in next 5 years or so, senior bankers languishing in Scale I to III,  have hardly any incentive as most of them feel that there is no difference whether they retire as Scale I or Scale III officers.  In recent years, some CMDs have promoted juniors in large number by ignoring the senior bankers.   This has led to increased animosity among different age groups.   Such banks are now facing bigger crisis. This is all due to wrong HR policies.

Unions in banks have leaning towards left parties, which have become almost irrelevant after Lok Sabha elections of 2014.   Like top management, union leaders too are working mostly to watch their personal interest and organize protests, dharnas and strikes as per the dictates of the left parties.   They have the least interest in the welfare of the bank or bankers.

Thus, all the stakeholders are least interested in the true growth of the their respective organizations.  Each one of them merely wants to watch his personal interest and wants to ensure that their remaining service (except the juniors with a service of less than 10 years) remains unblemished and they are able to get their retirement dues.  Juniors are wildered on account of lack of experience and coordination with much elder seniors.  With openings available  in new and private sector banks,  good juniors officers  are always interested to switch over, and thus have limited loyalty to their present banks.


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Likely Impact of Above Scenario on Aam Banker :-

The well known economic pundits are struggling to predict as to where will our banking sector go from this cross roads.    I am not a big pundit in that sphere, but with my over 30 years experience in the banking sector, I am trying to peep into future as it looks now from the point of view of Aam Banker.   This will some ideas and strength to bankers for preparing for future onslaught they are likely to face soon.  The following are the likely impact :-

(a)   As I have written in my earlier article, it will be now tougher for UFBU to extract an honourable wage revision as they have failed to get the same when going was much easier.  

(b)   With banking reforms on the forefront, the left dominated unions are likely to adopt confrontist attitude resulting in frequent strikes on issues not relating to wage revision, resulting in more wage cuts.   Such actions on the part of the bankers can also lower the prestige of bankers in the eyes of general public and they may lose public sympathy for honourable wage revision.

(c)    P J Nayak Committee report, if implemented in toto, would fundamentally change the face of Public Sector banks, while making incremental changes in the governance of private banks.  The present structure of Board which includes so called independent directors from union government, workmen, officers, RBI, Chartered Accountant fraternity made for good governance is actually serving the interests of corrupt bosses and resulting in large scale NPAs.   Everybody associated with bank is fully aware that such directors in reality are NON INDEPENDENT directors and serve as a source to blackmail the bank management on various issues.  Once CMDs allow such loans, these directors help the CMDs to clear other low rated loans.   In today’s ET (21st May, 2014), RBI official has been quoted to acknowledge that the CEO in question “and CEOs of other PSU banks were under pressure from some directors appointed by the government to approve select loan proposals, if the bank management refuse, the directors – who are professionals – would threaten not to clear the quarterly results”.    


Leading unions have already issued call for protest for opposing the recommendations of PJ Nayak Committee.   There is need to diagnose the recommendations by unions and oppose only those recommendations which are against the independence and growth of banks.  The committee report gives an insight on the performance of banks; and then analyses so to what has cripples them; and finally addresses the issue of governance.   It appears bank unions  have neither the capabilities nor the will to do such an exercise and thus are merely opposing all the recommendations of the Committee.  Great well wishers of Indian banking !!  Aam Banker needs to be cautious about such all round opposition as they are likely to lose face in the public eye.


(d)   Coming to capitalization of the banks and privatization of banks.   It is a emotive issue for Aam Banker.   Over the years, rather decades, we have been bombarded with circulars by unions that privatization will be a disaster for bank employees.  Thus, Aam Banker has lost the power to think independently on this issue.  Certainly, privatization will affect the job security aspect as private banks will not tolerate non sense strikes and free enjoyment for union leaders and sycophants.   In the changed scenario where youngsters are much more comfortable in private jobs then what we used to be about two to three decades ago.  Let me admit that a few years ago, when my children decided to join private sector, I too was apprehensive about the working conditions.   However, I have found that they have much more regulated working hours, flexible hours of working and two week end holidays.  However, when on job, they have to perform but need not be sycophant.     Thus, par se, privatization need not be bad.    


With limited resources at the hands of government, let bank employees give a free hand to government to bring changes in the sector which is on the verge of collapse.  Aam Banker is PS banks has always been complaining about pressure due to financial inclusion, priority sector loans and government business, which they have to do as they are treated as government banks.   However, they are not at par with government employees as far as salary structure is concerned.    This duplicity will end if banks are privatized.   Remember that it is not an easy task for government to privatize the banks.  Thus, I am of firm view that let things take their own shape rather than opposing these without discussing the pros and cons of such a change.

Thus in nut shell we can say that there are challenging periods ahead for Aam Banker, as they have to continue to struggle with long working hours, poor salary and pressure from unions to go on strikes frequently on issues on which they may not be interested to go on strike etc.   They have to bear the wrath of the government and public for the ills for which they are not directly responsible.   Now they need to take their independent decisions rather than swayed by emotions.   If bank reforms take place in the right earnest and government holding is brought just below 50%, they will have more positive impact than negative vibrations.  In such a situation officers may be out of CVC clutches and RTI.  They will not be forced to give loans purely on political and corrupt considerations.   With options of new banks, youngsters can look for greener pastures elsewhere.   However, all this is not going to happen overnight, as it is slow process and Aam Banker have to go through all the painful process before things settlement positively.

Waiting for a vibrant banking sector under the leadership of NaMo.

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