Thoughts & Ideas

Thursday, May 09, 2013

On Learning Banking

Twenty seven years ago when I joined the banking profession, learning banking skills consisted essentially of on-the-job training at branches which was interspersed with class room training by in-house instructors. Apart from some very few specialists (who virtually did not have a career in banking), recruitment in banks for managerial positions was solely by way of selection of promising youngsters who could be groomed for leadership roles in banking.  Prior knowledge of banking, economics, management, law or any other banking related was considered desirable but not necessary.

As and if one moved up the organizational hierarchy, the training and grooming followed the same pattern of learning by doing, along with sporadic training at in-house training centres. If you were very lucky or rather good at “managing” you could be sent to attend courses at specialist institutes or with other organisations. Though, in the organization where I spent my formative years there was a strong culture of “mentoring” which was done quite informally. One picked up skills through hearing stories and by having your work supervised by an experienced senior. 

According to perceived wisdom of the times banking was done at branches, which were in turn controlled from so called administrative offices. So to learn “banking” one needed to know the how and to some extent the why of processing transactions at branches. It was considered the end all and be all of banking. Once that was learnt one could administer branches sitting at administrative offices where the key skill was to have general management skills along with good communication skills – which meant ability to speak and write clear, concise, intelligible English. Over and above this to have a successful banking career, one needed good manipulative skills which was euphemistically known as handling things “tactfully”.  

As such, learning banking boiled down to understanding how to manually process records and transactions while the class room training was meant to impart knowledge of why a certain procedure was done in a certain way. One grew up as a banker with the feeling that the qualities of a “good” banker consisted of the ability to add up a long series of figures with accuracy, finding out mistakes in maintenance of books through a process known as balancing, calculating interest amount through two different procedures – the daily product method and the monthly product method - putting through trade finance transactions, knowing how to handle sundry legal issues such as making payment in case of monies lying in the accounts of deceased account holders etc. Since most of the core banking skills were imparted by the clerical staff at branches, who unfortunately lacked deeper conceptual knowledge of banking, financial markets, or marketing, overall skill levels remained at a very low level. 

The ultimate in banking skill was being able to reconcile something called “Clean Cash”. This was basically a manual process of checks and balances to ensure that all entries for the day at the branch had been put through in the correct accounts with accuracy. A good friend has very graphically described the situation in these words; “Clean cash was a nightmare ! I remember that in most cases, very grim faced personnel ran that corner of the office. Imagine the chagrin then that must have accompanied the masterly bearing of these men when certain entries, unreconciled after sheer toil and damage to a lot of head and hair, should find a magical resolution as if by divine intervention alone, upon the production of some missing vouchers by the corner chaiwalla !!   A senior colleague, with an inimitable sense of humour, once recounted that after a hard days labour extending well into the night reconciling the Day Book, as he approached his doorway in a by-lane off Calcutta’s famed university locality of Jadavpur, the dogs rebuked him with a bark that uncannily sounded  ... daybook daybook daybook !!!!!

Though the biggest bug bear used to be something called balancing and small armies of experts used to be engaged in a continuing war to balance the bank’s books. With increasing pressure of transactions on manual systems this was inevitable. Overall, the entire “learning banking syndrome” was geared towards managing the manual systems of accounting which had evolved into an extremely complex, unwieldy, leaky, and ugly monster and needed constant and close attention along with a lot of coaxing.   Some other interesting much admired skills used to be managing the inter branch reconciliation, managing the drafts account, calculating interest using something called monthly product and daily product etc. and, of course, maintaining ledgers. 

I came across some very sterling men, both clerks and officers, who used to take much pride in the quality of ledgers they maintained with all entries made in beautiful handwriting and all particulars carried correctly from folio to folio. But such men (and women) were few and far between and stating that the condition of most ledgers were pitiable was quite an understatement. 

After learning the skills of general housekeeping, the more smart ones got into the law and practice of banking. This involved being able handle some very typical situations which came up virtually on a daily basis. Things like how to enable operations in the account of an illiterate pardanasheen woman account holder. Banks had a policy of identifying its illiterate account holders who could not sign on the basis of their photographs. But what was to be done where the account holder refused to show her face for religious or personal reasons? There were well laid down procedures for handling such situations. And of course how to handle every conceivable eventuality was listed in some circular instruction or the other. There were specialists, whose only work consisted in recalling the circular in which a certain instruction was given. These holy men, did little productive work, but deigned to give their advise only after the mistake had been done! 

Most of these skills were learnt in course of story telling sessions which used to be virtually endless. During work, in the canteen, at the nearby tea shop, at training centres,  during after office get togethers, at the office picnic, or during prolonged periods of late sitting while trying to balance some obstinate ledger. Initially these story telling sessions used to get on my nerves, but slowly I learnt to tolerate it. It was much later, that I realized that this kind of story telling is essential for building up the culture of the organization, but also in informally integrating people together. In other cultures and contexts it also goes by the name of brain washing. 

One also met in banks, a very few, blue eyed, blond haired, twice born people who got into esoteric areas of banking such as Credit, Treasury, or Forex or the ultimate – a foreign posting. But those were not banking skills – but rather toady skills. These folks rarely, if ever, deigned to speak or interact with lesser mortals who peopled the branches. In fact, for them, banking used to be credit skills and only credit skills. And credit skills was reduced to calculating the current ratio (That is another hilarious story). The notion that credit risk existed due to something called asymmetrical information and that the study or analysis of financial statements was only one of the myriad ways, with numerous shortcomings, of reducing the level of asymmetry in information, was as close to blasphemy as you could get.

Overall, since, most of the work was quite routine and did not take too much time or skill to acquire and since bank jobs were well paying and prestigious, most of the staff had good educational qualifications and were otherwise intelligent people. Now these people had to have some outlet for their intellectual energies and this was found to be in endless discussions of the politics of transfers and postings.

With the passage of time and the widespread use of computers, specially with the coming of the core banking systems most of the banking skills which were so highly prized and so painfully learnt have become obsolete. Most of my generation of bankers, both who are doing actual banking, or teaching and mentoring the incoming lot, therefore have a skill set which has become obsolete in the present day context. It is unfortunate that the same situation exists in the management schools and specialist banking teaching institutions.


  • At 12:45 AM , Blogger DCHATS said...

    To my mind, a lot of "asymmetrical" credit skills were applied when one was managing credit exposures at branches. Unlike many other geographies, working capital lending in India was primarily asset based financing where the lending officer had to certify every month that drawings were covered by hypothecated current assets - and if you were assiduous in that role, you needed to understand the business dynamics of the borrowing entity and the quality of their assets on a fairly regular basis. One would often exit exposures on the basis of assimilating this "assymetric" information much before it got reflected in financial statements.I have come across relationship managers who have not gone through these rigours, often lacking in the ability to assimilate and act on such information.

    Also, the basic grounding that one had with some exposure to all facets of banking has definitely helped understand the cross-functional/ business impact of any new activity/ product whose development and launch, one has been involved in. I find this lacking in people who have had only a linear exposure to one facet of banking.

    Prabhat Singh

  • At 12:07 PM , Anonymous Vikas Ranjan said...

    It all depends upon, from which end are you looking at 'Banking'. If you look at the vast majority of Banking clients and activities in India, what you have described is what constitutes 'Banking'.

    But then there is another 'esoteric' 'highly skilled' banking, where no one knows exactly what is going on but still they make an indecent amount of money for themselves, while screwing the rest of the world.
    This kind of 'Banking' is 'successfully' practiced in the great financial centres of the US and Europe. Just look at boith the 'booming' economies, Cyprus include, to understand this 'all new' 'improved' Banking.


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