Cutting Corners Changing Banking Culture

A number of practices have developed among banks - in relation to deposits, credit and services which are violative of the spirit of regulations and sometimes of even of the letter EVER since Indira Gandhi nationalised ihc banks on July 19, 1969, the banking system has been in the limelight both lor right reasons and wrong. The reorientation of banking thinking in the way the political masters willed was a little ditiieult, at least to begin with. Hanking personnel are predominantly urban oriented. lt was one thing to talk of social orientation in banking services that was the easier part The more difficult part was to go out. live in rural areas and practise what was being preached. This was the lime when hankers learnt not to take some of the state governments words at lace value. It the Block Development Officer's report stated that an atl-u eat her road existed, there was a good chance that it tcally did not. In fact stale governments' money was often spent on repairing such (non-existent) roads. Likewise schools, electricity, eti It was during this period that banking culture started changing. Prior to nationalisation, the average hanker was in the classical mould. An epitome of conservatism, an elitist. The massive recruitment binge that Hanks went on post-nationalisation (which was needed given the then compulsions) brought a sea-change in banking culture. In many states, banks were preferred to industry and the administrative services. The 1970s-80s period saw banks attracting talent. The new breed banker was entirely different from his predecessors. He brought mathematical models to credit appraisal, supplementing what were till then only judgmental decisions. The discounted cash flows, the net present value ol money, the supreme importance of key financial ratios (which admittedly existed earlier but in the background) all came about during this period. The machinations of the politico- bureaucratic masters during this period brought about a number of practices, quite a few of them dubious. Broadly these practices may be categorised under three heads those relating to deposits; those relating to credit and those relating to staff and services. The entry of foreign banks and their altitudes had a profound impact on the way the Indian banks worked.