The cost of delay

The origin of the idea of merger of associate banks with parent SBI is perhaps lies at the doorstep of government. Left to SBI, it would not have ventured into this self defeating and the most unwarranted exercise. Clearly, this exercise is aimed NOT at strengthening SBI but rescuing the sinking associate banks with the burden of huge and unacceptable levels of NPAs. SBI does not need any more increase in its size as it is already nearing a stage that it is unwieldy. But the reason government advancing for merger is - to have a few strong banks to take on the competition. This reason doesn't cut ice with anybody. The real reason which is most probable could be to obviate itself from the burden of capitalising weak banks perennially.

The loser in this gambling is SBI and the gainer is government and the associate banks. As it is, SBI is struggling to manage its own size and weight. Post merger, it could be rubbing salt into the wound for SBI. Parent SBI is already saddled itself with unprecedented levels of NPAs and to make matters still worse the NPAs of associate banks are even more alarming. That's why I called the merger self defeating for SBI.

With the news of merger being in air for around a year, the associate banks have started slow peddling of the loaning activities for over six months till now. They have almost stopped lending for a quarter now and busy balancing books and cleansing their assets of NPAs anticipating their merger into SBI. And it is now official that the merger is being delayed/pushed to next quarter ie, next fiscal. Even in the first quarter of next fiscal it unlikely because of its preoccupation with balance sheet activities. That means, it may stretch to Sept quarter. The cost of this delay could be enormous in the sense that SBI is inheriting a weak and truncated asset books of its associates.

- The cost of the delay (of merger) therefore is huge for SBI though it is unintended.

If you have any comments, please post it in the blog.

K.N.Krishnan.

Some thoughts to mitigate hardship.

Bank Staff as it is, were under severe work pressure even before the introduction of demonetisation. Demonetisation, cash exchange and short cash supply have worsened their position even further. Since November 8th banks are mainly grappling with how to manage the long queues, unmanageable crowd and irate customers. Most of their time and energy is used up in the demonetisation exercise leaving no time to do their core banking / commercial activity. A new directive / instruction comes every other day bringing in some changes in the existing arrangement or a new thing introduced. All these initiatives which are coming fast and furious have left the staff high and dry. All these have rubbed salt into the wound.

What can be done to mitigate the hardship?

Some stray thoughts:

1. Roll back the business hours of bank to the earlier 2.00 pm or 2.30 pm.

Why?

The government/RBI is determined to push the economy towards Cashless or less cash, digitisation etc, and even a cap on cash transactions may also be a reality sometime in near future. Under these circumstances keeping the cash counters open for a long time during the day is not required or warranted.

Benefits:

The scarce man power can be better utilised and there will be a considerable relief to the staff manning the front line. It releases quite a good amount of time to engage the staff in other banking activities like monitoring /recovery of NPAs etc.

2. Introduce mobile ATMs on the lines of mobile libraries.

This will reduce the footfalls at the branches. It's a win win situation for both the customer and the bank.

3. Introduce and increase the number of non cash branches. Not all bank branches necessarily do cash transactions. Because "cash is no more the king".

The disruptive technology that is engulfing the banking has brought about a metamorphosis of sorts.

Banking is no more the same anymore. Introduction of payment platforms like paytm, SBI buddy, wallet banking, mobile banking, Internet banking etc, have rendered the conventional/traditional cash dispensing counters at the bank redundant.

4. Introduce 5 day week at the earliest. Bank employees really need a two day week end. We have no time for personal life, family life and social life. All along, slogging in the Bank late hours and early hours.

5. Introduce branch managers allowance.

Nowadays heading a branch could be a nightmare. Although no amount of monetary incentive could compensate the ordeals a branch manager undergoes - something is better than nothing.

The bank job has lost its charm/sheen it once enjoyed. Moreover the job market provides abundant opportunities for the young and skilled people. And the salary structure in the banks is a great dampener.

All the above mentioned suggestions if given a serious thought and implemented might mitigate the hardship of the Banker. It also attracts good talent to banks. Otherwise left overs, residuals in the job market will end up joining the bank.

And State Bank has to survive at least another two centuries.

K.N.Krishnan. 9449612446; 9449841375

VRS in Associate Banks - What it means to SBI.

The VRS announced in the associate banks has come as a big surprise. For many in those banks it is a God sent opportunity. They were a bit nervous at the idea of merger simply because the work culture in SBI was a bit too much for them. The work culture in Associate Banks unlike SBI as per their own admission is lethargic and relaxed. To meet standards of SBI work culture it really requires some extra effort on the part of the associate Bank's employees. This appears to be a tall order for some given their less hectic and relaxed atmosphere they were accustomed to. Against this background, the response to the VRS, it is assumed will be overwhelming. And they are rubbing hands in glee at the prospect of VRS.

If this is so, then what it means to the post merger SBI. Already SBI is groaning under severe shortage of staff. Large number of branches are manned by single officers. With the merger of the associate bank branches with a truncated staff (on account of VRS), the pressure on staff in SBI post merger will further increase and may reach breakdown levels. There may be a pretext /excuse from the management that branches will be merged, relocated or closed. All this technical jargon will not offer any real relief to the already battered staff. Whatever relief IF AT ALL ANY may not be commensurate with the addition of the branches. At the end of the day the number of accounts will remain the same. More over, will the government allow closure of branches having tasted the advantage of huge SBI network for implementing its programmes? The sum total of this exercise is more burden to the already beleaguered SBI staff.

Is the time not too far to repent for being a SBI staff.

I request all to participate in the discussion on this blog.

K.N.Krishnan,
Dy Manager, ZO, BZ-1, Basavangudi.

Cashless economy and the banking.

There is lot of talk going on in the country about moving towards cashless economy. Right from the common man to the Prime minister of the country the subject of cashless transactions has attracted attention. Rather, the discourse has been brought to Centre stage by the Modi government in its efforts to clean up the economy from black money dirt. What it means to the banks? How banking is impacted from this shift from cash intensive economy to cashless economy? More than banks, it means a lot to the government.

The first and foremost and immediate benefit of this shift is, it will bring businesses/all the transactions to the tax bracket. This will improve the tax mop up substantially and effortlessly. This single step is a very effective tool and has twin advantages. Two birds can be hit with a single stone. One - tax collection will improve. Two - black money generation is restricted to that extent. The beauty of this is, one is inversely proportional to the other. The more the tax collection, the less is the generation of black money. After all black money is that part of the earnings which is not taxed/accounted for.

Coming to the banks - enormous number of accounts will be opened. Footfalls will increase manifolds. Because large section of the population in India and vast geographical area is still unbanked. This section of the population is forced to enter the banking system whether or not they are interested. Because henceforth it will become a basic necessity. Banks must gear up to receive this influx of new customers to their books. They have got to put in place the men and machinery required for this surge of clientele. And they don't have a choice. They have got to oblige all and sundry. They just don't have the option of choice of the customer. Even now public sector banks don't have that option. This will affect various profitability ratios adversely because banks will end up doing something which given an option they would have avoided. But private and foreign banks are extremely discriminative in the choice of the customers. This has to be put an end. A level playing field has to be created for all the banks. There is also in the air, something called Banking Transactions Tax (BTT) as a part of tax reforms. Government has to pay the banks a percentage of this BTT for their work to compensate their transaction costs. Banking transactions tax (BTT) and cashless transactions may one day in future go hand in hand. And it is for the good of the Nation.

And the debate continues......

It is more than twenty days since demonetisation was introduced that the debate is still on - if this is going to bring down the black money in the system. The suddenness of the initiative and the untold hardship it has caused to the populace especially at the lower strata of the society is the talking point. The unpreparedness of the government while embarking upon such a huge exercise is too evident and it has given some ammunition to the opposition parties to make some noise. While the government says that there is bound to be some inconvenience to some when an exercise of this scale and magnitude is undertaken, the opposition discounts and counters that it is too big pain to achieve too little. According to the estimates of the experts black money kept in the form of cash is a very small percentage - it varies between 6-15%. To achieve this little by the government, the amount of hardships that the common man is made to endure is too big. There is a possibility of businesses being shut down, economy being thrown out of gear, people rendered jobless mostly the labour class in the unorganized sector are the direct and worst hit. The common man is undergoing the ordeal of cash crunch willingly with a hope that something good may happen to him and the country as promised by Modi after sometime in the future. With this expectant hope he is enduring the hardship without murmur. That's why the so called Akrosh divas organized by the opposition was a damp squib. Every body willingly cooperating with the government in that hope of something good will happen sometime in the future. The hope that has been raised is keeping the country calm amidst what could have been a catastrophe otherwise .

Demonetisation by itself may not bring in the desired effect of eliminating black money. It has to be accompanied by a package of  whole lot of other measures. Of course, Modi has indicated that these will follow soon. Benami transactions, accumulation of gold, money laundered in foreign tax heavens, real estate reforms are some of the areas of next focus. Electoral reforms are conspicuously missing in this laundry list. These measures will have to be necessarily pursued and sustained till the ultimate goal is achieved. While sustaining these clinical or surgical measures (whatever one calls) it is absolutely essential to push the country towards cashless economy to contain the origination of black money. The benefits for the common man could be immense once it is stabilized and gets going. No doubt it will change the discourse of the country itself. It is a huge, huge challenge for Modi and his government. An honest citizen will definitely support him in this nation building endeavor. Modi has to be congratulated for the bold step he has taken to eliminate black money and the ills of it the country is facing. It is a challenge not only for the government but also for the banking system. Banking will surely undergo a metamorphosis of sorts. It is a challenge as well as opportunity for the Banks.

Let us all hope for the best.

Rs 500 & 1000 notes demonetisation.

The withdrawal of 500 & 1000 rupee notes from currency is a welcome and most needed step in choking the black money circulating in the system. The size of the black money in the system is too large that came to be called as parallel / shadow economy. The presence of this dirty money in the system was too well known and for too long. Every big transaction whether it be in real estate or gold or while acquiring /creating a new asset or conducting an event of mega size of social /cultural /political will happen with black money. Without this unaccounted money these events /transactions could not have happened simply because of the magnitude of these events and dearth of white money. The presence of this dirty money has pushed the prices of the commodities and services beyond the reach of the common man and to ridiculous levels. Also this has deterred the clean men from entering electoral fray thus leaving the electoral space for criminals, rowdy sheeters and other people of disrepute. This created a situation of inequal distribution of income /wealth in the country. By the act of this dirty money the wealthy are becoming wealthier and the poor are  further getting impoverished. Many services /commodities have remained a mirage and out of reach for the common man by the artificial push in the prices. In the process a division of class in the society has been created - haves and have nots.

There is a debate going on in the country about the efficacy of the present move in curbing black money. That is for the economists to sit in judgment over the issue. Politicians are toeing their party's line of looking at the issue which is only expected because there are no statemen in any political party today who can rise above politics. There is also allegations /charges of selective leakage against the government. There are unsubstantiated whispers that the privileged persona grata have got wind of this move in advance. The timing is also said to be aimed at deflating and impoverishing the political adversaries on the eve of UP election. All said and done the havoc this dirty money is playing in upsetting the entire economy, the corruption it proliferates and above all financing terrorism from across the border are too well known and are to be acknowledged as the greatest danger to the nation. They are eating into the vitals of the nation. The move to demonetise therfore has to be looked from the prism of national interest rather than petty political hairsplitting.

Having said that, the government it appears going by the experience of the ordinary citizens is ill equipped for this gigantic exercise. Having sucked the dirty money from circulation at a lightning speed, replenishment of clean money is not ensured with the same speed. There is a wide gap and mismatch. At least Banks are not tipped of this so that they could have been well prepared. it was a sudden sunami like situation for the banks. Bankmen as usual are taking the brunt and slogging day and night. And the irony is, after so much of hard work toil and stress they only get brickbats from the irate public because public are not aware of the tremendous constraints of both cash and people under which they are working. Citizens are struggling to access their own money. Common man who has no sophistication / luxury of access to cashless channels of payments is the worst hit. If the situation is not addressed with highest priority and swiftly, the common man will  be pushed to the end of the tether and the good will generated by this move will turn out to be a wrath.

NPAs - The bane of banking industry.

The NPAs in banking industry is the hot issue that is being debated at the highest quarters whether be it in bank board rooms, RBI or the finance ministry. All are obsessed with how to contain and reduce this growing monster. The issue of NPAs is not addressed appropriately by the powers that be. The genesis and growth of NPAs are not entirely due to the real banking and economic reasons. But then there are some big sharks in the system who willfully withhold repayment. These wilful defaulters are often has the  protection of and shielding from the politicians. The NPAs occur broadly on account of the following situations.
1. Ineligible / undeserving selection of borrowers often to meet the budgeted targets.
2. Stiff and unrealistic targets stipulation.
3. Lack of proper post sanction/disbursement monitoring often due to inadequate manpower.
4. Fulfillment of social responsibility concomitant with public nature of the government owned banks where the economic / commercial viability of the proposal takes a back seat in Sanctions.
5. The real unforseen adverse economic environment which stiffles the growth thus making the funds employed unproductive (NPAs). The inordinate delay, inertia and redtapism (read corruption) while clearing / sanctioning the projects /proposals also add up to NPAs.
6. Last but not the least the willful defaulters. The politician - industrial houses nexus of all hues is the real hard nut to crack. They have the capacity to pay and at the same time has the muscle and the power NOT to pay. Sometimes politicians shield and protect them and in some cases politicians themselves are at play. These have the legal, political and financial wherewithal to thwart, to tweak, to manipulate and evade the long arm of the law. A case in point is Kingfisher saga.

Then, what is the remedy / solution to this menace? The following proposals / suggestions could be thought of.

1. De link social banking from commercial banking. Establish a separate arm for social lending outside of the Basel norms. After all any government cannot absolve itself of the welfare responsibility for economic and commercial considerations. Free banks from this responsibility and make them truly commercial and business entities. I am afraid if I am flogging a dead horse by suggesting this. The enormous and omni present network of banks is too difficult for any government not to resort to this low hanging fruit to implement their welfare schemes.

2. Make stringent laws and amend existing laws to enable quick disposal of suits related to money and finance. This is of utmost importance because many wilful defaulters are taking shelter under loopholes in law.

3. Establish fast track courts to adjudicate money and finance suits. Amend law to give them Supreme powers so that Judgements given by these fast track courts are not appealable in civil courts. They should be made appealable only in a similar fast track higher courts. This will avoid long drawn legal battles and enable quick resolution of cases. This will also works as a deterrent to borrowers who often resort to legal route on some flimsy grounds with chief intention of avoiding repayment. This will enable the blocked funds to enter banking system and recycle them for further lending.

4. Courts also should view these cases with larger good in mind than the individual good because banks at the end of the day are the trustees and custodians of public money.

These I believe though seems to be *far-fetched* will definitely yield good results if implemented. It requires political will to do that. But then it is a million dollar question. These will make the banks sound and healthy and also make the economy vibrant. But every body seems to *bury their head in the sand*.