Concept Banking

Concept Banking

The year was 1972. State Bank of India, under the Chairmanship of R.K. Talwar pioneered the concept banking with the opening of five Agricultural Development Branches (ADB)in the entire country on a single day. He chose the first set of ‘Agents’ (later changed to Branch Manager). Significantly, three of them were in Andhra Pradesh. I was asked to arrange for the inauguration by the District Collector as the first incumbent of Visakhaptnam ADB. The date was set by the Central Office. District Collector S.N. Achanta inaugurated in the presence of Regional Manager, Development Manager, Area Superintendent (Bank has divided each region into compact areas to give guidance to the managers and oversee the development lending that had social objective and also effectively liaise with the district administration).

Government of India by then established Small Farmers Development Agency (SFDA) and Marginal Farmers and Agricultural Labourers’ Development Agency (MFALDA). (Both were subsumed in Integrated Rural Development Program subsequently).Each of them had a Project Director – either a junior IAS officer or an experienced Block Development Officer as Project Director.

Though Bank was lending for Agriculture from the day of Nationalization of Banks, concept banking involved special attention to the target clientele under village adoption (VA) approach and Group Guarantee scheme (GGS) to cover the unsecured marginal farmers and agricultural labourers. Both village adoption and group guarantee were innovations at that point, of the SBI. Bank recruited agricultural graduates as Rural Development Officers to serve the extension requirements of credit and this proved a boon to farmers. Of course, Syndicate Bank pioneered in lending for rural development with extension and others followed with their own incremental innovations.

Bank strongly believed that credit risk can be managed adequately and appropriately only when its field staff and managers knew the area, the activity and the person behind the activity well. It is with this perspective that an elaborate 8page schedule was prepared for VA. Data requirements demanded both secondary data and primary data. Types of soils, area under cultivation under different crops and different streams of irrigation, bovine population, flora and fauna, demographics, number of holdings in the fold of small and marginal, details of opinion leaders etc., constituted the major components of the schedule. Bank held one-day workshops on the manner of filling up the schedules at its Staff Training Centers.

Branch Management that too of a concept branch, whose functioning was under review by the top management, was the most enticing challenge faced by me. It involved careful planning, effective public relations, responsible business operations, handing limited human resources, and above all proximity to the farmers, the live wire of our economy. Head Office posted one accountant and one field officer, with a promise to post two more field officers in a month.

Visakhaptnam was MFALDA district. Project Director Alla Pitchaiah disclosed that the Agency identified 500 agricultural labourers engaged in pineapple and cashew cultivation on the hill slopes and 5000 marginal farmers for crop cultivation in Bhimunipatnam and Pendurthi blocks. He expected that the ADB should take the leadership in lending.

Day used to start at 5a.m., when I used to pick up the field officer on the way to village after village for their adoption by the branch to deliver credit that was scarce and out of tune with farmer’s requirements. Collecting data about the village helped due diligence of the farmers later. Farmers knew what they do with their land, animals and tools. They were a beehive of knowledge in so far as agriculture is concerned. They taught me agriculture.

Bank gave a soil test kit with a manual of its usage. This helped me build close relationship with farmers as I used to test the soil and tell the farmer how much and what fertiliser should be applied. It was here I learnt the meaning and shape of udder of a milch animal; how important it is to take care of the calf to ensure yield to the optimum. It was the poultry farmer who taught me the way to weed out a sick bird from the flock to protect the asset. Knowledge of activity, knowledge of area and knowledge of person are three essential competencies of a good credit analyst. Apart from the ICAR-published Handbook on Agriculture and Animal Husbandry that provided academic inputs, farmer interaction helped me become a practical banker.

Since this was concept banking, press and media were after me to flash stories of how the bank was helping the farmers. One day, the UNI correspondent, Hanumantha Rao asked me whether he could accompany us (I and my 2 field officers) to a village, Pandrangipuram, 6km from Tagarapuvalasa (Bhimunipatnam Block) where I programmed on-site documentation for disbursing crop loans. Application for crop loan and loan document were each of four and nine pages. Each page required a signature of the borrower and guarantor and if it is thumb impression for an illiterate farmer, a signature of the witness at the end of each page. The process started at 7am and by lunch time about 30 of the 50 targeted farmers could be completed. At about 3pm he took leave of us. We did it for the 30 adopted villages in the two blocks.

Next morning, as I was having my morning meal, the Development Manager (Ag) and Regional Manager gave two separate calls almost asking my explanation for the news item that appeared in all the English and Vernacular dailies (those days, newspapers in Visakhapatnam used to be delivered post-noon and therefore I had no knowledge of what appeared). I told them that I did not issue any press statement, but the Correspondent picked up the story as he witnessed the onsite loan documentation. The news item mentioned: “Even for Rs.100 loan, 410 signatures are required. The Agent, State Bank of India ADB confirmed.” This was a box item that appeared underneath a photograph of the inauguration of State Bank Staff College by Y.B. Chavan, FM, with R.K. Talwar, Chairman. No wonder, it sparked lot of controversy. But the issue had to be handled. Regional Manager asked me to take the morning flight and reach directly State Bank Staff College, Begumpet for a meeting with the Chairman pre-lunch.

Girding up my loins, I left for Hyderabad. In the meantime, Chairman asked the Development Manager (Ag) whether it was true that the document required so many signatures. He counted physically and confirmed that the number mentioned in the news item marginally fell short. I went to the Staff College Visitors’ lounge and saw the RM and DM waiting. They took me to the Chairman. He asked me to join lunch.

After a few fondly enquiries about the branch, the number of villages adopted and the way of identification of borrower-farmers and the number of farmers covered by the branch flor lending etc., as also of my father and family, he asked me for a solution to the problem. My response was: when the law of the land was equal to all banks, why our bank should have a 9-page loan document compared to a 4-page document of Canara Bank. I have also told him that per day I was able to cover only 50 farmers with such elaborate application and documentation and I would not have the luxury of covering 2000 farmers before the onset of monsoon, he directed the RM to immediately post three more field officers and desired that the lending must be over before commencement of the crop season. Those days, cash and kind component were to be delivered separately.

Then, he asked the Chief Manager Agriculture, SBI Central Office to constitute a working group with me, DM (Agri) as members and phoned up to Chitale & Co, legal advisers of SBI to join the team. The task was to simplify the application form and prepare a simpler loan document for release of all loans to farmers, ahead of the season.

The initial tremors caused by the box item almost damaging the reputation of SBI, resulted in simplification of procedures for loan disbursements. Every Loan sanctioned had to be reported to the Controlling Authority. I devised a Control form containing the required details in a single sheet, the size of which was 15”x20” incorporating twenty sanctions in a sheet.

The branch during the first year established a record of lending 2000 farmers for crop loans and 50 farmers for term lending to various activities like construction of dug wells with motor and pump set, diary, and 100 agricultural labourers for pineapple cultivation on the hill slopes of Simhachalam. This Pineapple variety was a juicy variety and I realised that they needed marketing support as the local sale was only for table variety. Liaising with MFALDA Kolkata market was connected for bulk sale.

The recovery season started, and every jealous eye was watching us. Believe me, it was repayment and not recovery as I assured during the awareness camps for recovery that they would get next crop loan if they repaid on time both interest and principal. At least 10 percent pledged their jewellery and repaid the crop loans while the rest sold their crops and repaid. Agricultural Cash Credit at the beginning of next season had no non-performing loan with ‘nil’ balance., Cash credit

We had night halts in the villages and used to attend the marriages of the children of farmer-borrowers as also opinion leaders with a gift from the branch to the couple. There used to be quite a bit of socialization with the farmers and the reason: credit flowed with extension and advice in time.

Concept banking moved much latter to small industries. At the behest of GoI, banks set up SME branches. Bank after liberalization gradually diluted this type of concept banking and flow of credit with extension.

*This is part of my autobiography.