Monday, December 26, 2011

Scripting the culture of change

The Chairman scripting the culture of change
It was 20th July 1972 sunny morning. In Visakhapatnam, no English daily would reach the morning readers to relax with a cup of coffee in the early hours of the day. The cool sea breeze on the long verandah was all that was available.

The previous day was tiresome as I spent the whole day till about 10p.m., in the village near Tallavalasa 30kms East of Visakhapatnam taking documents at the village for 90 crop loans I was to disburse, as Agent, Agricultural Development Branch of the SBI. Suddenly, the telephone rang uninterruptedly in the hall, as if it was a wake-up call. I picked up the phone. It was Development Manager (Agriculture) V.S on the line. First question: Did you see the paper today?’ No: was my reply. He said: ‘There is a box item in all the dailies on what you said in the village.’ I replied: Sir, I do not remember to have told anything to the press as I was only taking documents for the Agriculture Cash credit I programmed to disburse.’ The Box item reads: “SBI takes 400 odd signatures even for a hundred rupee loan. B. Yerram Raju, Agent , Agricultural Development Branch, SBI, Visakhapatnam confirms this, while disbursing crop loans for about 90 farmers in Tallavalasa village.” UNI. (I was told that all the dailies carried the item. Later in the month, all the magazines carried the item as a Box item.)
Then I said: I remember that the UNI Correspondent having come to know that the Bank is going to the farmer instead of the farmer coming to the village came to the village and sat through the whole day and must have sent the dispatch. I only confirmed his observation. Then he said: “dear raju: You know the Chairman Shri R.K. Talwar is here in Hyderabad. Yesterday, the Union Minister for Finance, Y.B. Chavan and the Chairman inaugurated the State Bank Staff College and the PR people had put in lot of efforts to put the picture in the front page and down below the photo this box item appeared.” Then I realized what the item caused.
Quickly followed a few more calls: from the Staff Superintendent, District Superintendent, the Regional Manager VNVP Rao – all calling, as if, for my explanation!! My RM said: The Chairman would like you to fly to Hyderabad today and see him by lunch hour.’ There was only one Dakota flight of Indian Airlines from Vizag. I immediately rushed to the Airport after managing the ticket.
I reached at 1p.m and went to the Local Head office to meet my RM and Development Manager. They accompanied me to the Chairman, who was about to go for lunch. “Oh, Yerram is here. Come; let us talk over lunch, he said. My shiver in the pants ceased. Then he asked the Development Manager: did you count the number of signatures on the cash credit document and Demand Promissory Note with the take-delivery letter that the farmer had to sign to get crop loan from us?” He said: “yes sir: it numbered to 427.” Then he asked me: how much time you took to complete the documentation for the 90 farmers? Sir, I and two of my field officers took about 13 hours in the village. We have to complete the disbursement before the cropping season ends in another week to ten days and we have 2000 crop loans to disburse in 30 adopted villages of the bank; even the appraisal form is nine pages , I said. What is the solution?
Sir, “Canara bank takes only a four-page simple document. When the law of the land is same for every bank, why should we take a cumbersome 9-page cash credit agreement? Each blank filled, addition, alteration, etc require the borrower’s signature and under group guarantee, the guarantors’ signatures or LTI. Each illiterate farmer’s thumb impression needs witness of two known persons. All this makes up for the number 427. We have to disburse tens of hundreds of loans in a number of villages ahead of the season.” The doyen of bankers understood the problem. He asked the Development Manager to go over to Bombay Central Office, the next day along with the solicitors from Madras. The team was to work out simple crop-loan documentation within a week’ time. I was to go along with the team to perfect it.
The result: simplified documentation and appraisal procedure for crop loans. This anecdote left an indelible impression on my career as a banker.

Sunday, December 25, 2011

A great legacy indeed

The legacy I enjoyed:
After a couple of years as Assistant General Manager of a Textile Mills immediately following my post-graduation in Economics made me sterner stuff having handled a strike by a 450-labour and later the management declaring a lock-out for 24 days. My fatehr desired that I should become a Probationary Officer in either RBI or SBI or get into civil service. I could fulfil his wish preferring SBI PO to IPS where also I got selection. The grooming I got from my dad made me hold my head high.

My father, a banker who joined the Imperial Bank of India (IBI) in 1936, had his grooming at the altar of efficiency in banking and finance. He was an upright cashier and the most loving and yet most feared Head Cashier of the Bank in the composite Madras Circle of the IBI. I used to carry coffee flask to the main branch of Visakhapatnam when I was seven years at 12noon – his coffee hour for the entire 94-year life he lead. One day, he asked me to wait and there was lot of anxiety in his face. He went to the Agent to report that he gave one section in excess to the captain of a ship and the ship was about to sail in the evening at 4p.m. The Agent telephoned to the Port Authorities to allow this cashier, i.e., my father to reach the captain. He gave his car to go to the port. My father could go to the captain. He seemed to have told the captain of the excess payment. The Captain said: “I did not count: young man, for a IBI cashier never faults. He pulled the cash cover and asked my father to recount and take if the amount was alright. My father recounted and showed to him the excess one-rupee note section (Rs. One hundred in all – and this was a big sum for a cashier whose monthly salary was just Rs.36 with a biennial increment of four annas (quarter of a rupee). That was the image of a bank cashier in that by-gone era. My father was later cautioned by the Agent but the Captain insisted on the British Agent R.L. Wishart to reward the young cashier that accelerated his increment by an year!!
He was posted as Official-in-charge of a Pay office at Ramachandrapuram in East Godavari District and was given ten days time to take over the charge of his official position. During the take-over period, the person-in-charge was supposed to verify all the stocks and gold ornaments pledged to the bank to confirm that the drawing power was well within the drawing power. The predecessor was known to be lax in all the official matters. My father was examining the stocks – and they were supposed to be oil drums. He took a wooden stick and started beating all the drums and asked the owners to break open the seals. Initially, there would appear to be lot of resistance and later there were veiled threats. Unrelenting, he insisted and one drum opened, revealed that it was water and not oil. He lost no time in advising both the branch controlling the pay office and the Madras Local Head Office while serving a notice on the borrower firm to make good the entire advance within 24hours. The Agent who had a hand in perpetrating this fraud became angry at his reporting to Head Office but could not find fault in calling up the advance. The event led to the suspension of the predecessor. The Agent, however, transferred my father even before the complete take over to another pay office. This incident was narrated to me when I was undergoing training as probationary officer. Another lesson I learnt from him was the way I should do physical inspection of stocks of wooden logs and iron and steel. The length, tensile strength of the steel measured in weight and the quality of wooden logs – measurement and volume etc.
At another branch, he noticed that a cashier working at the counter, for whose omissions, commissions and intromissions’ he is responsible by virtue of the Agreement that the Head Cashier had with the Bank, was opening the clipped notes at the cash verification table. He lost no time in asking him to quit the table by dislodging him from the work. He recommended that cashier’s suspension and the Bank had to conduct the enquiry and on admission of the guilt, the cashier was let off with a cut in increment. He used to say that a cashier who cannot see the cash in the safe or counter at work as pebbles or insects, that person was unfit for cashier’s job. Such rigidities have no place today. But the legacy he left and the lessons he taught me held me in good stead during my nearly three-decade career in the State Bank of India – the legatee of IBI. I had the unique opportunity of serving his retirement letter as I was posted to the branch as Branch Manager where he was serving as sub-accountant (both son and father cannot serve in the same branch and his posting to another local branch was also issued but he preferred to retire having only an year left for his actual retirement in 1974). The Regional Manager processed his application for retirement during my one-month taking over period. On the day of my assuming charge, he retired from the same branch. The most fortunate legacy, I thought worthy of recall in these days when corruption and bribery are being fought in streets.

Monday, December 19, 2011

Future need not be rosy but not reddish either

Markets are tizzy at the moment. The economy looks down the drain in the backdrop of global debt crisis; falling rupee; rising inflation; political paralysis and less than estimated GDP growth. But what holds promise is the concern of all and the anxiety to resurrect the sagging economy. Finance Minister has a tough task ahead in the Budget 2012-13, with just an year to go for the General Elections. The fiscal deficit would hardly find space for further doll-outs. The ray of hope is that the US economy promises a revival. The bail-out package to Europe also lends some credence to keep the balance swinging in favour of arresting unrest in the economy. However, the domestic undoing in the last two years unfolding scams after scams needs tackling firmly and this is where the infirmity lies. Markets are not going to behave worse if the FM makes bold to increase the Share transaction tax to at least one percent. Second, the farmers must be provided input subsidies of a larger scale than now but with laid out crop planning regionally acceptable; investmetns in drought proofing the economy; and finding resources for merti goods like education and health at double the rates prevailing now. The year ahead may not be rosy but need not be reddish either.

Tuesday, December 13, 2011

The falling rupee - domestic policy paralysis or global clues?

Let us look at the falling rupee in the context of inflation. Pare it with the value of rupee - you will notice that the fall is fatal. There is no dispute that there is decision deficit along with the rising fiscal deficit. We have to rise above petty politics and create conditions conducive for attracting investors. To blame it all on FDI - retail is looking the problem through a coloured glass. There is decline in IIP on a continuing scale and this is in the backdrop of unceertain future in the farm sector - what with the rising rate of suicides of farmers and crop holiday in one of the leading agrarian states in the country. Let me now take the point of Euro crisis and its impact on Indian economy. Despite our not so strong exports to Euro Zone, the refusal or absolute lack of resolve to tackle fiscal indiscipline by the Euro Zone with London,Berlin and Paris ganging up against any reasonable support clearly direct a worse recession in the next six to twelve months. This is bound to adversely impact, notwithstanding the stable domestic savings and investment ratios thus far. While it would be injudicious to provide the sort of stimulus that the Government announced in 2008, the Government should create conditions for a steady flow of investments in infrastructure sector. The country has blurred in continuing to support thermal power in the context of unsupporting coal reserves and has done little to create a power grid of varietal sources of energy. Energy risk management speaks volumes of the failure of government economic pundits. This has scope for drastic improvement and this does not depend upon global recession. It is time that the Government wakes up to realities. Whatever the RBI could do has been done. It is for Government to do what it has to do to contain inflation and brace up for better governance, both political and economic.

Being a Co-author

Having been a co-author for five of my fourteen books in my four and half decades of teaching, training and learning career, introspecting into such experience unfolded many lessons worthy to share. My first co-authored book on rural banking was with my boss, where I wrote most of the text and the boss gave a second reading and scripted five chapters himself. He being the boss became the first author and highly competent and understanding as he was, there was no regret. He took the lead in its propagation. The second was a co-edited book with a trainee-bureaucrat on a theme we settled upon. We invited articles from distinguished writers on the subject; we edited them; the first author took the lead in extending invitations to writers; he wrote the introduction to the book and I suggested that he should be the first author. Then came the third co-edited publication: it was the proceedings of a Seminar on the subject on VISION 2020 in a State Agriculture Economy. The co-author was a reputed Agriculture Scientist and a retired Vice-Chancellor. Though most of the work relating to conduct of the seminar and compilation of articles presented at the seminar was done by me, my highest regard for the person of eminence who chaired the seminar and who went through the script for arranging them in an order appealing to the reader, resulted in giving him the rightful first place among the co-authors. The fourth was again the summary of the proceedings and presentations of a Seminar on Corporate Governance organized by me and my co-author. The co-author was the person who suggested for publication of proceedings and took lead in tying up with the publisher of repute. Naturally, the first among us was he. The fifth publication was on Small Enterprises, a subject close to my heart. I requested an old colleague of mine, who is an expert on International Banking, to script a chapter on international markets. He did it in good time. Though he initially did not agree to be co-author, I invited him to be on rolls and he took the second place.
The latest one is a cut different. The co-author and I got in touch with each other through the mediation of his Professor who enrolled him for Ph.D. His dissertation was reviewed by me. The request to be co-author for a different kind of research effort took me close to him. The themes were exchanged; the script went up and down; there were additions of experiences; there was review and re-review and it was an year and half work on the net and a year-and half of research by the co-author with his team of research. The whole concept and thought process took shape at the research desk. It was only when the first draft got ready, both of us happened to see each other to run through the script together. It was the work behind the book; the passion of the co-author in the whole script; his zeal for being an author of global repute in the very first script – all together, put him as the first author.
The pride and prejudice of the first authorship and the humility of the second authorship in the journey of experiential learning are worthy to share, I thought.

Friday, December 2, 2011

FDI in Retail: Whose interests would it serve?

Twists in Indian Retail Trade:
In his inimitable style, Dr Debroy exposed the hollowness of the much touted latest reform agenda – the FDI in Retailin the edit piece of Economic Times on 2nd Dec 2011. The essence of it all is that the farmers, mostly the small, marginal, and the tenant farmers as also the Kirana retailers are bound to loose out. The loosing tenants are driven to suicides. The large farmers are out of farming mostly and settled in real estate or tourism or hospitality industry that is more remunerative but are not out of farms. They rented out to the smaller cousins. The APMC Act and its rules deserve all the blame. The Agriculture market Yards (AMY), most of which own high value assets and turn out good cess to the state governments invested too little in taking markets closer to agricultural production. They could have utilized the ICT to establish a well-endowed storage cum market yard. In the hinterland of the AMY, farmers could have been given a smart card as the first step. They could have set up the spot markets after constructing four-layered storage godowns: ground floor for seeds; second floor for fertilizers and other inputs for farming; third floor for outputs; and the last floor, cold storage connected through a conveyor belt system with all bins properly marked. The farmer who enters the market in such a system would have swiped the card at the entrance; unloaded his produce with laden weight of the produce recorded; sorted and graded the produce and at each of these points the weight and price duly recorded. If he were to arrive late during the day, he could just unload the produce and proceed to the dormitory on the first floor of the service building of AMY. The whole produce so delivered would get into the spot market when the farmer would receive 70-80 percent of the value of the produce so delivered after paying up the service charges on-line. This would eliminate the stranglehold of the kutcha adityars or the exploitative intermediaries. Such markets to be set up require INR 20-30crores and should not be difficult to be found. The farmer, irrespective of the size of his holding, would have gained. It is important in such situation to get rid of the CACP. The spot market can eventually be linked with the futures when real price discovery would have taken place to the advantage of the farmer. The food retail markets would have the prospect of sustainable gains and the consumer also would have had the distinct advantage of the direct purchase and sale. All said and done, the FDI Retail would have no more than ten percent of its space for the food products.