Banking services & financial inclusion

On 23 January, I was invited to speak at the All India Bank Employees’ Association&’s annual meeting led by Punjab National Bank, on “The Future of Democracy in India”.  The theme seemed a little incongruous for an occasion where “comrades of the world unite” to discuss their welfare. In fact, I wonder if bankers ever have time to think or worry about democracy. Judging by the mechanical manner in which customers who enter banks are greeted, it would seem that democracy is an outlandish concept. Then I realised that while banks may not be worried about democracy, they are surely worried about the decisions that governments take because such decisions mean that bank employees can no longer take it easy.

The Modi government&’s Jan Dhan Yojna, where banks had to open several million accounts so that every Indian has a bank account, would mean that much extra work for banks. The transfer of subsidies from LPG and other such schemes directly to the accounts reduced corruption phenomenally.

Such a huge transaction requires that banks also engage business correspondents to reach out to untapped villages. These correspondents are usually employed on contract basis. Ironically, one of the contentious issues discussed at the annual meet was that business correspondents were dispensable and that bank employees were already doing more than their share.

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There are certain areas where the All India Bank Employees’ Association appears protective about its space. It appears antagonistic to the idea of private banks setting up shop in this country.  Obviously private banks are competitors and most people choose to eliminate their competitors even before they arrive at the battle ground. But is there space for private banks? And who has created that space? The liberal economic climate post-1991 has allowed private players in several sectors and banking is one of them.  Private banks are now doing brisk business and giving the nationalised banks a run for their money.  In public sector banks the government is the major stakeholder so it is obvious that they have to partner with government in different public services, including providing access to credit for the least financially empowered citizens. For that we salute them. Private sector banks, because of their very nature, would not expose themselves to the extent that public sector banks do. But, increasingly, private banks are also lending to different categories of creditors.   

What bothers most of us is that customer service in nationalised banks borders on the pathetic. One does not feel welcome in a bank. It is quite common for us to enter a bank and not see a welcome smile. Bank employees see customers as an intrusion to their paper/computer work. One wonders if customer service is not the prime focus of bankers, for where would  they be without their clients. Yet many don’t seem to understand this fundamental logic.   

With the Modi government, things do look daunting for nationalised banks. Apart from having to put in many more hours of work, there is also much more expected from them rather than the business-as-usual attitude. There is the Start-Up India scheme, which some believe will benefit the already privileged class. Others, however, hope that it will usher in a level playing field and allow smaller players to become entrepreneurs and begin to manufacture goods that they have conceived of, like motor car spare parts and a whole range of things. “Make in India” surely cannot happen if only the big players are allowed to gulp up all the economic space, thereby turning the large majority of Indians into dependent workers. And what about North-east India where the industrial climate is still in its infancy? What start-ups are possible here and are banks going to provide the hand-holding necessary for such start-ups?

Tourism and the service industry seem to be the key drivers for the economy in the region, but most of the financing goes to well established borrowers/clients. I know of many young entrepreneurs in the tourism sector who face the initial setback because they don’t have the financial backing for their projects to become viable. Should the “Make In India” scheme be a one-shoe-fits-all model? Can it not be tweaked to suit the needs of states that do not have much scope for manufacturing but have other strengths such as leveraging their natural resources and value addition to make those resources good enough for export?

In most North-east states the credit-deposit ratio does not cross 13 per cent. This means that all the deposits mopped up by banks from the region go into financing projects outside the state. Surely this is a cause of concern that the All India Bank Employees’ Association should have discussed. We know that high level bank officers do discuss this with state governments but can bank employees too not raise this sticking point? After all, most employees belong to the states they work in. Surely they must be uncomfortable that the deposits from their states are channelled into mega projects outside the region. In fact, this could be the prime reason why the North-eastern states continually fall between the economic cracks. There is so little money circulating within the region. Money begets more money. If the credit-deposit ratio here improves, one would like to believe that there would be more visible economic outcomes and the GDP of the North-eastern states would also improve. 

Most times, bankers meet and discuss only major clients who also happen to be the biggest defaulters.  The rest of the populace are treated with disdain. I have many stories about how banks make people run from pillar to post because they don’t score too well on the financial scale. They don’t own gold ornaments or a home or property or a car, stuff that India&’s upper middle class are able to offer as collateral. One is not saying that banks should finance a losing venture, but considering that 350 million of 1.3 billion Indians are living below the poverty line, there has to be more that the banking system ought to be doing to pull this huge number out of the poverty trap.

So what really is the future of nationalised banks? Do the employees have a stake in laying the foundation for the future of a robust democracy in India? What is the vision of the All India Bank Employees’ Association in the North-eastern states? Can it project these for public consumption? Democracy requires that all stakeholders play their role and that they pool into the larger agenda of nation-building. While one expects the government/executive to tackle the challenges in social sectors such as health, education, water supply and sanitation, roads and communications, banks are expected to be a supporting pillar in financial inclusion.

It is ironic that the credit-deposit ratio, even after the financial exclusion exercise, has not improved as far as the North-east is concerned. Does this worry bankers? It worries many of us who see farmers, struggling to access credit and small and medium loans, stagnating. And above all, it is a pity that banks have still not reached the last mile. The All India Bank Employees’ Association meeting discussed the role of business correspondents. These are people who reach the last person in villages. They enable last mile banking. They are integral to banking in the remote areas of the North-east. They have helped revolutionise banking by bringing banks to the doorsteps of people. This is how banking is democratised.

That&’s the future of democracy in the North-east!  

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