Thoughts & Ideas

Saturday, August 31, 2013

Kursela Days 1 – Getting There

Sometime late in 1987 I received a letter advising me that I had successfully completed my probationary period of two years in State Bank of India and was now a confirmed, permanent employee of the Bank. My joy was short lived as I (along with the rest of my batch mates) came to know that the Bank’s management had taken a decision to the effect that “all probationers were to be posted to rural branches notwithstanding any constraints”. It seems that the Government of India had issued directives that all bank employees should mandatorily spend at least 2 years posted at rural centers. Consequently, my bank had decided that it would be best if its employees did their rural stint in the beginning of their career when they were young and, hopefully still idealistic and before they became burdened with family responsibilities. This is how I came to be posted to a place called Kursela, in Katihar District in Bihar.

By local standards, Kursela was a fairly large, well connected village with direct road links through a National Highway to Patna, Purnea, Siliguri etc. It was also on the main broad gauge railway line connecting Patna to Jalpaiguri, though only a few passenger trains stopped there. Geographically, it was located at the intersection of the Kosi with the Ganges and fishing was a fairly well established industry with a couple of factories producing ice to enable freezing of fish before transportation to places like Calcutta (yes those were the days when Kolkata was known as Calcutta), Siliguri, Patna etc. The village had a high school, a Government Primary Health Centre, and branches of 2 banks. There was a huge palace belonging to the ex-zamindar of the place, though it now looked somewhat neglected and shabby. Other than that there were few pucca houses. And wonder of wonders the village had an airstrip with a hangar in which two small planes were parked. The planes had not flown for as long as local people could remember. It belonged to the family of the ex-zamindar and, with some members of the extended family down to moving about on bicycles, it was improbable that the planes would ever fly again. Kursela also had a cold storage facility for storing potatoes, and the State Bank branch was located in the annex of the cold store.

I was congratulated by all my friends and well wishers on being lucky enough to get posted to such an easily accessible place. It being small matter that going to Patna, the State Capital took 12 to 14 hours by road to travel some 250 odd kms, and the nearest decent urban centre was Siliguri which was also about the same distance though traveling time was a little less.

On confirmation, I was initially asked to report to the Regional Office in Purnea from where I got orders to report to Kursela Branch. I had, meanwhile, shifted to a friend’s house in Purnea and so decided to commute daily to Kursela from Purnea, the distance being only 50 odd kms down National Highway 31. Branch timings were from 10 am to 5.30 pm. On my first day at my new posting, I reached the Purnea Bus Stand by about 8 am and found a bus which would take me to Kursela and would start by 8.30 am. The commuting time to Kursela was about an hour and so I reached quite comfortably by about 9.30 am. After a little enquiry I reached the Branch which was about half a km from the Highway, a little before 10 am and presented myself to my new boss, the Branch Manager who gave me a pleasant welcome and made me feel very important. After the initial pleasantries, and offer of water, paan, and then tea (in that order), all the staff members trooped in to be introduced to me. The expression on their face suggested that they were meeting some kind of unique specimen, which I could not really understand at that moment. It was only later, when I developed friendship with them, did I come to know that the look of wonder emanated from the fact that they had never met a directly recruited officer earlier and had some quaint ideas as to how such human beings looked and behaved.

That evening, by the time it was about 4 pm, i.e., much before the official branch closing time, the Branch Manager suggested that I should pack up and leave for Purnea. I was a little hesitant to leave early but, since work for the day seemed to be over, I agreed. This is when I had my first surprise. The entire staff of the branch, starting from the Branch Manager to the guard, messenger, canteen boy and all the clerks and officers in between escorted me down to the Highway from where I was to catch the bus. They even waited till I got onto the bus! Since there was no regular bus service from Kursela, going to Purnea involved standing beside the highway and trying to flag down a passing bus and getting into one which deigned to stop. It was normal to wait fom one to one-and-a-half hours every evening trying to catch a bus back to Purnea. The mystery on being escorted to catch the bus soon became clear – sheer courtesy. The Branch Manager commuted daily from Purnea where he had his own house and where his family stayed and, so, leaving the branch by 4 pm was his daily routine.

Friday, August 23, 2013

A Rural Sojourn

I joined State Bank of India as a Probationary Office after doing my graduation with dreams of a plush life, with lots of money, prestige, cushy foreign postings, a relaxed life style, and all the other good things in life. I woke up to a little bit of reality in course of my 2 year probationary period, though the dreams were kept somewhat alive by the kind of deference one received from my colleagues, most of whom had come up through the ranks. But dreams are nothing but dreams, and I (along with rest of my batch-mates) was rudely awakened by the instructions given by the General Manager (Operations) to the effect that “all probationers are to be posted to rural branches on confirmation notwithstanding any constraints”.    

Rural India or Bharat looks very idyllic and beautiful through train windows and stories and poems of nationalistic writers, but a different image started emerging in course of conversations with colleagues over the 2 month period from the time we received our confirmation in service to allotment of branches for posting. The heat, lack of electricity or running water, no proper places to live, problem of getting clean edible food, absence of functional toilets, non availability of national daily newspapers, the petty rural politics, the violence, lack of motorable roads, mosquitoes, leeches etc. etc. was explained to us in gory detail by folks who had been there and lived to tell the tale. The books suggested for reading, which gave a much truer account of living in rural India, were Phanishwarnath Renu’s “Parthi Parikatha”, and Shrilal Shukla’s “Raag Darbari”, but these books did not prepare us for reality when we faced it in real life.

The process started off with a fight to get “good” rural postings. That is, places which qualified as rural branches as per definition of GOI but were easily accessible from the main towns. I remember the most sought after branches in Bihar were Deepatoli (which was virtually within Ranchi) and ADB Bihta (about half hour travelling time from Patna). Lesser mortals like me were allotted the Purnea Module which was popularly referred to as a “Kaala Pani” posting in Bihar. Landing in Purnea, with its lone restaurant and single hotel with its own generator with prospect of spending the next 2 – 3 years of life in its back-waters was my first major growing-up shock.

After completing my 2 years of rural service and another 2 years of semi urban service deep inside Bihar in the middle to late eighties, in retrospect, I can say with confidence that it was the best thing that happened to me. I resented it like mad when I was initially forced into it. All my colleagues with pairvi (clout) managed to avoid it and, subsequently got much better assignments but all of us who did the rural assignments turned into better bankers (and also hopefully better human beings) and the stint also gave us a lot of self confidence. The experience helped us build resilience, ability to innovate solutions and, most importantly cleaned up all the cobwebs that formal education had built up in our psyches. I understand that SBI has now more or less given up this policy of compulsory rural and semi-urban assignments. If it is so, it is a pity and a big loss to the Bank, to its managerial cadre, as well as to the nation.

My experience in living in rural India has been very interesting with various kinds of very educative encounters, of which the most memorable was my acquaintance which turned to friendship with Dr. Sitaram Shah and Dr. Bibhuti Narayan Jha.  Dr Sitaram Shah was posted by the Bihar govt and he actually lived for 6 days a week in that village in the back of beyond (Kursela) and was available on call on 24 X 7 basis. The innovations he brought about in rural health care were truly amazing (at least to my plebeian eyes). For example, one day he told me that, at the primitive Primary Health Centres (PHC), there was very high risk of post operative infection but most of his patients could not afford to go  even to the district hospital. He proudly then informed me that there had been zero post operative infection cases at his PHC. He explained that he used to get his surgery patients to bring along fresh straw mattresses, which he would arrange to get burnt after the patient was released, resulting in zero post-surgery infections!

In another interesting conversation, Dr. Shah mentioned that most of the illnesses faced by his patients had roots in malnutrition. At the same time his patients could not afford the solutions (eating milk, eggs, chicken, apples etc.) mentioned in the western text books doctors were brought up on, for either economic or religious reasons. In this profound dilemma he did some rudimentary research on nutritional value of locally available fruits and vegetables and found 2 excellent substitutes - tomatoes and bananas - and started prescribing one raw tomato and / or banana a day along with the medication and the results were excellent. He had one regret though; he did not have the wherewithal to write a proper research paper on his findings!

I really enjoyed my one and half year close association with him, and going around with him on his evening rounds to individual patients’ houses and witnessing at first hand how he handled those poor illiterate people with care and cheerfulness. I had similar experience with Dr Bibhuti Jha in Purnea (he now practices in Sitamarhi) and I still remember the intensity of his conviction on why Social and Preventive Medicine should be considered the most important MD specialisation, which unfortunately was not. Both Dr Shah and Dr Jha, incidentally, are still practicing what they preached and believed in.

Freshly minted doctors should take up the challenge and consider their rural stint as an opportunity not a chore!

Monday, August 19, 2013

On Financial Inclusion

Regular commercial banking is one of those real boring professions, but occasionally one encounters a Eureka moment. My personal Eureka moment happened about 25 years ago and consists of a matter-of-fact statement made by one of my customers to the effect that “Hajoor, if someone had helped me open this account 5 – 10 years ago, the truck that I drive would have been mine”.

It so happened that after completion of the two year probation period I was posted to a rural branch of State Bank of India somewhere in the back of beyond. The regular practice for most people posted at rural branches was to live at the nearest urban /semi-urban centre and commute daily, which I too followed for about a month. Over this period I realized that instead of wasting nearly 3 hours every day in commuting on dirty, over-crowded buses on roads which were more of an apology, with a high possibility of ending as a road accident statistic, it made sense to find a place and stay in the village where I was posted. With some difficulty, I managed to convince a retired school teacher to rent me a room in his house, and so my rural sojourn started in earnest which was to last for about 1 ½ years. 

I slowly settled down to the pace of life in Kursela (Dist: Katihar, Bihar) and got used to living without electricity, running water, toilets, newspapers, TV and such other sundry conveniences which most people of my socio-economic-cultural background take for granted. I soon befriended a number of people in that village and so was never short of good company. One major problem which remained was access to clean, regular, healthy food. There were no restaurants and the option was either to cook for oneself or eat at a small way-side eating joint where basically farm labourers or other itinerant workers ate. This is where I befriended a truck driver, a poor fellow, driving someone else’s ramshackle truck on some kind of commission basis and just about managing to make both ends meet. He was about 40 – 45 years old, lean, dark, of middling height, and always had a week old salt and pepper stubble on his face. 

One day, this truck driver came to me with a request if I could help him open an account with the bank, something I immediately arranged. Incidentally, opening a bank account at most banks in India used to a massive exercise in bureaucracy, which only people who have gone through would know. One of the tasks that I had, therefore, taken upon myself was to help open a bank-account for whosoever requested. Towards this I initially faced tremendous resistance from the Branch Manager – but that is another story altogether. 

About six months after the simple savings account was opened, this truck driver came to get his pass-book updated which I got a clerk to do (those were fully manual operations days). Before returning the pass-book, as an authorized official, I had to initial the entries in the pass book and I was pleasantly surprised that the fellow had been able to save close to Rs.10,000/- and I jocularly remarked that look you are a rich man now (in those days I used to get a net salary of less than Rs.2000/- a month and had never been able to save more than Rs.3000/- in my account).  The man bent down with folded hands to thank me for helping him open the account and then made the statement which I mentioned above in the first paragraph. I no more remember this fellow’s name, but his face and the look of gratitude in his eyes remain forever fresh in my mind. 

This experience also gave me a psychological boost to help open bank accounts of anyone who approached the bank or I met and felt would be able to make regular savings. Well, I had to make a little effort in streamlining the back-end operations to ensure that opening a large number of accounts would not overload or impair the branch’s normal functioning. But the more than enthusiastic support I got from my staff ensured that opening a new account was no more an issue at SBI, Kursela. The net result was that we were soon surpassing all our deposit budgets for which my Branch Manager promptly took all credit (same guy who had raised all kinds of objections for opening new accounts). These were the days when the concept of “financial inclusion” was not even a twinkle in the eyes of RBI or our mighty economists, leave alone poor, barely educated bankers like me.  

I was reminded of the above incident on reading RBI’s Press Release dated 1st July 2013 where they disclose that they have received 26 applications for issuance of new bank licenses. This was preceded by a nearly 2 year process of consultation with various experts on need and modalities for issuance of new banking licences. This, in turn was preceded by the report of the High Level Committee on Financial Sector reforms headed by Raghuram Rajan which gave its recommendations in April 2007 and, inter alia, recommended permitting more entry to private well governed deposit taking small finance banks.

In the initial discussion paper issued by RBI on 11th August 2010, in giving reasons why it would like to issue more banking licences, RBI had mentioned that “It is generally accepted that greater financial system depth, stability and soundness contribute to economic growth. But beyond that, for growth to be truly inclusive, requires broadening and deepening the reach of banking.  A wider distribution and access of financial services helps both consumers and producers raise their welfare and productivity. Such access is especially powerful for the poor as it provides them opportunities to build savings , make investments , avail credit , and more important , insure themselves against income shocks and emergencies” Well, very noble intentions indeed! However, looking at the list of applicants, it is difficult to judge as to how well they are geared or would have interest in fulfilling RBI’s slated objective of bringing about financial inclusion.

Talk to any banker in India who may be from private, public sector or from a foreign bank or a cooperative bank. The impression one would get is of extremely tough competition, long working hours, bad macro-economic conditions for lending etc etc. So are these 26 hopefuls trying to go where even angels fear to tread?

On the other hand statistics show that 65 out of 100 adult Indians do not have a bank account. Transferring money is difficult and expensive. There are virtually no established, safe channels for safe and secure small savings in India. In a study attributed to Rutherford (The Poor and Their Money) and quoted by Armendariz & Morduch in their book “The Economics of Microfinance”, Jyothi a deposit collector in Vijaywada working mainly with women collected her client’s surplus funds, held them securely, and returned the funds (less a fee) at the end of an agreed upon period.  The effective cost of her services was equivalent to an annual interest rates on deposits of roughly negative 30% per year. There are no reasons to believe that this was an isolated case or things have since improved. This fact is repeatedly brought into sharp public focus every time there is failure of one of those “blade” companies. Every human cluster, both in rural and urban areas, has evolved informal savings mechanism through chit funds, mutual savings societies etc. and, in spite of mushrooming of commercial bank branches, opening an account is still a nightmare.  

I would like to add that RBI’s actions (inspite of its stated intentions) have not been very helpful in promoting financial inclusion. In a recent incident, I had to prove to my bank that I was me before they allowed me to continue operating my account which I had properly maintained for well over 30 years. Similarly, for a long time I could not operate my demat account since I could not a valid provide “Proof of Address” as mandated by SEBI through its 2 page circular. 

I did not lack many of the numerous pieces of paper and plastic which defines a person’s existence in India. But, unfortunately, all of them did not add up to any kind of real identification. I had a passport which gave my permanent address of the rented flat in Bangalore which I had vacated 7 years ago. I have a driving licence which was issued in Chapra and renewed in Hyderabad and carried the address of another rented flat in Hyderabad. My PAN card does not have an address. I have a few bank accounts - each lists the address of the place where I lived when I opened the account. But I, along with life, moved on with time from each of these addresses. I presently do not have a fixed telephone line in India. I don't remember ever having that fixer of all problems – a ration card. I am sure that I do not have a voter id card (though I had once registered as a voter in Bangalore and also voted in a Parliamentary election) or the latest rage – an Aadhar Card! 

What is required in Indian banking today is a kind of paradigm shift which occurred when shampoos started getting sold in Re 1 sachets or mobile companies started offering life time incoming free or Rs.25/- recharges. The market for shampoos and mobile phones exploded. Similarly, the banking market is sure to explode if we can use technology for bringing down transactions costs and simplifying and redesigning processes which do away with a host of anachronistic, wasteful traditional banking practices. Instead of just translating existing manual practices to an electronic platform, we should be using technology to redesign the entire banking interface with customers, the internal housekeeping processes, the appraisal and monitoring mechanism afresh for a new banking world. A lot of these skills are available but not with regular bankers. Rather these skills are presently available with the micro finance companies, the mobile phone industry, and the retail customer marketing industries. Sadly, none of the 26 applicants seem to have much exposure to these areas.

RBI’s expectation in offering new banking licences is that a larger number of banks would foster greater competition and thereby reduce costs and improve the quality of service, which in turn is expected to promote financial inclusion, and ultimately support inclusive economic growth, which is a key focus of public policy. Hopefully, the issuance of new banking licences would not increase the dog-eats-dog atmosphere in the already overcrowded traditional banking space while leaving out the “vast segments of the population , especially the underprivileged sections of the society , who still have no access to formal banking services”(the words in italics are RBI’s) apart from the great multitude of Small and Medium Business Enterprises, who provide the sheet anchor to the Indian Economy, but are still to come in from the cold.