Senior bankers had frequently been in need of assistance from economists. For long during the 19th century and first half of the 20th century banking industry attracted very little educated talent because of relatively low pay and long hours of work. Top management would generally be members or trusted relatives of industrial entrepreneurial families Highly centralised decision-making called for banking technician operators to run the banks and their branch offices. Many of the middle and senior level managers would be the ones who joined as the junior most clerks, worked diligently, mastered the procedures and proved extremely trustworthy by the top management and owners. They had very little exposure to the outside world of business and economics except through the working capital facility relationship interaction they would have with their borrower clientele. High intellect and professionally qualified bankers were conspicuous by their absence in senior bank management even after two decades of India's independence. Except for the State Bank of India which regularly recruited fresh talent at the junior officers level and put them through rigorous managerial training and exposure, the induction of talents at the junior or middle management levels from other sectors was extremely limited. But bank top executives had to interact with the senior staff of the Reserve Bank of India and the government officials. So, the senior bankers felt limited in their capacity to track economic monetary developments in the economy in the second half of twentieth century. So, they recruited economists as part of the secretariat office of the bank chief executives. One or two economist with a good flair for writing on English and some exposure to deal with statistical figures were appointed. They would prepare the briefs for the Chief Executives for various meetings, especially meetings with the Reserve Bank of India Governor and other senior officials of the Reserve Bank, the ministers and secretaries of the Union and State governments as also for the Indian Banks' Association meetings, They would prepare the draft speeches to be delivered by the banks chief executives at various fora including meetings and seminars organised by chambers of industry and commerce and accounting/ management associations.
These economists were also expected to release brief educative and informative economic newsletters on a weekly/ fortnightly/ monthly basis to help the senior and middle level bank management executives to better appreciate the macro level business environment in which banking business operate and the competitive forces operating within the banking industry. Often, these economists would assist the top management in designing competitive business strategy and undertake publicity and advertisement campaigns.
Nationalisation of banks in 1969 gave a further impetus to the senior bankers to become economists by getting more economists to work with them. United Bank of India Chairman / Custodian, B K Dutta, wanted that each of his senior official has an economist secretary. Therefore, an economist in the bank had to get involved at some stage in the publication of the banks' economic newsletter and compile the directors' annual report. Writing for the economic newsletter helped one to master the economic and business trends, besides improving skills in drafting in English. I had studied economics for seven years in the school, college and university till I obtained my Master degree. As part of the study of economics, I had to cover a wide range of topics in what was called Indian economics. But it was at the United Bank of India, I had the real initiation in monitoring the Indian economy and banking on a regular basis - a boring job that helped build insights and an exposure that helps transform a business economists into amateur applied macro-economist. I would continue doing this job for the next three decades wherever I would get employed and which ever level of management I would operate at.
Sunday, October 24, 2010
District Credit Plans: My Unfolding Voyage 54
Once the Lead Bank first round surveys were over, the nationalised banks were required to prepare five year district-wise credit plans for all their lead districts. This was a fairly easy but time consuming task. Easy because the exercise was essentially a wishful guesswork to start with as a Five Year Plan for Bank credit in a district would depend on the expansion of the bank branch network in the district, besides the potential for credit extension. Easy because no one expected that the credit Plans on their first cut would be realistic and implementable, but would provide estimate of a broad order of magnitude of the ban credit requirements of a district.
It was time consuming. Because another round of impressionistic survey would be required along with discussions with government officials and bank branch officials in each district would be required.
The data available on the sectoral outstanding bank credit for each district for past years were available but with a time-lag (compilation by RBI was not online as it may be today with Internet and high-speed computers with RBI data processing centres: those days bank branch offices did no have computers or Internet and statistical returns were compiled at the branch level manually from manually recorded ledgers). However, past data for the district was available. More recent data on the credit disbursements by the lead bank was available with the lead bank: one could get this data simply by visiting the few branches in the district (at most 10 -12 branches). The hinterland that each of these branches could cover was known. The information on the farmers, artisans, traders in these hinterland areas were broadly available from the Lead Bank survey. The districts in general had very little industry and seldom had any big industrial unit and setting up of new large or medium scale industrial unit was not a regular feature. Thus, what was needed is to estimate the credit needs of sectors like agriculture, animal husbandry and poultry, small business and trade, artisans and self-employed transport operators ans small and cottage industries. Rough and ready scales of finance per unit of land / unit were available for various economic activities sought to be covered by bank finance. Total potential number of borrowers were known and was far greater than what the banks in the district could cover in 10 years even with a reasonably large expansion of the branch network. So, a reasonable target of new and existing borrowers were arrived at for each priority sector/ sub-sector economic activity for the five year period. Multiplying with the average norms / scales of finance, the physical target of the number of borrowers would yield broad estimates of bank credit plan for each sector. Summed up, one gets to X crore of rupees as the bank credit requirement of the district for the next five years. Less any one would complain about bankers being too pessimistic, the credit plans were made on rather optimistic basis and related to various assumptions on the district administration's achieving certain milestones on rural road and electricity development, etc. No one would criticise later that the actual credit disbursements would be far lower that the credit levels planned for a district.
Economic development could not be achieved merely by planning ban credit. This would be understood soon and district-level coordination committees of bankers and state government officials at the district level would be formed. District Credit planning would therefore transform into a rolling five year plan prepared every year. But much would depend on the priority sector targets that each bank would be imposed every year by the Banking Ministry: as the targets increased, the banks opened more branches and sought avenues for credit growth in rural districts. To enhance the speed of financing, the banks would formulate standardised schemes of finance for various activities. Scheme formulation would become a major activity in nationalised banks.
It was time consuming. Because another round of impressionistic survey would be required along with discussions with government officials and bank branch officials in each district would be required.
The data available on the sectoral outstanding bank credit for each district for past years were available but with a time-lag (compilation by RBI was not online as it may be today with Internet and high-speed computers with RBI data processing centres: those days bank branch offices did no have computers or Internet and statistical returns were compiled at the branch level manually from manually recorded ledgers). However, past data for the district was available. More recent data on the credit disbursements by the lead bank was available with the lead bank: one could get this data simply by visiting the few branches in the district (at most 10 -12 branches). The hinterland that each of these branches could cover was known. The information on the farmers, artisans, traders in these hinterland areas were broadly available from the Lead Bank survey. The districts in general had very little industry and seldom had any big industrial unit and setting up of new large or medium scale industrial unit was not a regular feature. Thus, what was needed is to estimate the credit needs of sectors like agriculture, animal husbandry and poultry, small business and trade, artisans and self-employed transport operators ans small and cottage industries. Rough and ready scales of finance per unit of land / unit were available for various economic activities sought to be covered by bank finance. Total potential number of borrowers were known and was far greater than what the banks in the district could cover in 10 years even with a reasonably large expansion of the branch network. So, a reasonable target of new and existing borrowers were arrived at for each priority sector/ sub-sector economic activity for the five year period. Multiplying with the average norms / scales of finance, the physical target of the number of borrowers would yield broad estimates of bank credit plan for each sector. Summed up, one gets to X crore of rupees as the bank credit requirement of the district for the next five years. Less any one would complain about bankers being too pessimistic, the credit plans were made on rather optimistic basis and related to various assumptions on the district administration's achieving certain milestones on rural road and electricity development, etc. No one would criticise later that the actual credit disbursements would be far lower that the credit levels planned for a district.
Economic development could not be achieved merely by planning ban credit. This would be understood soon and district-level coordination committees of bankers and state government officials at the district level would be formed. District Credit planning would therefore transform into a rolling five year plan prepared every year. But much would depend on the priority sector targets that each bank would be imposed every year by the Banking Ministry: as the targets increased, the banks opened more branches and sought avenues for credit growth in rural districts. To enhance the speed of financing, the banks would formulate standardised schemes of finance for various activities. Scheme formulation would become a major activity in nationalised banks.
Surveying As The Leader: My Unfolding Voyage 53
When India won Independence from the British, the distinction between the Queen's Whites and Black Natives got replaced by the distinction between Jubilant Native Rulers (J-NRUs) and Backward Mass (BM). The J-NRUs class distinguished itself from the Queen's whites class by just one feature: while J-NRUs were jubilant in taking up the responsibility to develop the lot of BM, the whites were only interested in exploiting and oppressing the BM. By 1969, the JNRUs had to nationalize the bulk of the Indian banking system to use it as yet another instrument of public policy to uplift the conditions of the BM.
The country's districts were allocated to the State Bank of India Group and the 14 banks nationalized in 1969. Thus each of these banks had become Lead Banks in respect of certain districts. United Bank of India, my employer was allocated about 14 districts as its lead districts. The Reserve Bank of India and the Finance Ministry formulated the Lead Bank Scheme. The Lead Banks were made responsible for ushering in economic development in their lead districts by taking the Lead and coordinating role in broadening and deepening the banking network. This would mean tapping unused/ idle financial resources to convert them into bank deposits and extend credit assistance to all kinds of economic activities in the rural areas. The Lead Bank Scheme became the focal point for formulating and implementing area development plans in the districts. But the first task was to know more about the disticts' economic status and condition and then formulate appropriate District Credit plans.
One of the task of United Bank's Research Division was to publish Lead District Economic Survey Reports. Being one of the officers of Research Division, I had been allocated a few districts for completing the Survey Reports. For each of the lead districts certain information was already collected by commissioning the help of local college/ university professors. This had been done even before I had joined the Bank. Based on such information, the Lead Bank Survey Report on Tripura - a full-fledged State of the Indian Union, but a Lead District under the Lead Bank Scheme because the size of Tripura was relatively small then - was published by the Bank. That was given to me as a model to start with along with some 20 to 30 statistical tables compiled by the outside agencies on behalf of the Bank and the district gazetteer published by the State ( in most cases, these were not updated after Independence by the District Administration). So, the task was relatively simple. Most statistical data were either based on Census or surveys by State agricultural departments or the Annual Survey of Industries and very little of information was generated through primary survey. The task was ultimately to identify the growth potential of each districts. It was essentially a task of reducing big tabulations into analytical convenient smaller tables and writing a few pages of report in English and associated proof reading. I had to deal with two districts of Assam and two / three districts of West Bengal. These being in the nature of impressionistic Surveys, and there was very little time available before the Lead Banks were to complete the task, I was not required to even visit the districts on which I was writing out the survey reports, except in the case of Dibrugarh and Jorhat Districts of Assam as there additional information was needed to be collected. What the District Commissioners/ District Magistrate's offices should have done got shifted to the banks after nationalisation. That was part of the process that continued for long to ensure that the Government officials had hardly any work except conducting progress review meetings to monitor the work passed on to the banks and other public sector agencies. Great Design.
For two successive days, I had to come back from the Calcutta Airport because the flight to Jorhat did not take off due to bad weather or availability of aircraft: those were the days when Indian Airlines was only carrier for domestic air travel. The passenger fare for the flights from and to the North Eastern States were concessional and the alternative of Railway travel would have cost more than 48 hours against just 2 hours by flight. That is the reason I was sent by my employer by air: normally a junior officer were not entitled to travel by air in those days of commanding heights of the public sector.
A Fokker friendship aircraft flight took of on the third day noon. My third journey by air in life. The flight to Jorhat was less than an hour. Tea and snacks were served soon after take-off. But before most passengers could sip their tea, the aircraft started jerking. The aircraft lost and gained heights suddenly and frequently with the tea cups and food plates jumping in the air and then falling back on the try-tables. This lasted for about ten minutes before the journey returned to normalcy. We sagely landed in Jorhat airstrip, an air force base at that time hidden on three side by trees on high table lands and rocks. The troubles of the survey journey had not been over yet.
The elderly District Development Officer (DDO) of my bank came to receive me at the Airport. But to our utter dismay, I did not find my checked in luggage at the terminal. On enquiry it was revealed that the luggage was not offloaded in Jorhat and has gone to Gauhati where the flight was supposed to terminate and that I can hope to get my luggage only two days later when the next flight to Jorhal would come from Kolkata.
The District Development Officer's office had an an adjacent room to host guests. I was put up there and I had to prepare mind to the bright prospect of remaining in the same clothes that I was wearing for the next 48 hours. Soon after I had got myself settled in my room, I went to the District Development Officer's room to have a cup of tea and schedule my information gathering tour of the district over the planned seven days of my stay in Jorhat. The DDO would retire in a few years' time and he was very affectionate to me but he had a surprise visitor from Kolkata at that time. This elderly visitor, a Commercial general manager of Indian Airlines, had announced that he had come to meet me as well. Three of us spent about half an hour together before the visitor from Indian Airlines left. But he assured us that my luggage would be delivered to the District Development Office by afternoon the next day when the flight that comes from Gauhati (Capital City of Assam, now named as Guwhati) to Jorhat. We thanked him and the luggage did reach me as promised by him. It is only when I returned back to Kolkata after15 days that I learnt from my parents that the same person had visited them in connection with his search for a suitable bride for her daughter. We have not met at time later.
My bosses at Calcutta telephoned to Jorhat to advise me to cut short my stay in Jorhat and proceed to Dibrugarh where I would be spending another two weeks. On the fourth day of my stay at Jorhat, I took the flight to Dibrigarh - less than 30 minutes journey. The Banks DDO in Dibrigard was a middle-aged person but appeared very enthusiastic about his work and appeared smart.. He had arranged for me a small room in a (no-star hotel) near his office. Before I stated my visits to various government offices, farming centres and commercial offices including those of the oil companies, I had a daily meeting with him. The first and foremost question that he wanted answers to himself was the kind of respect and cooperation that he would deem fit for his so young a colleague from the headquarters. He wanted to place me by my level. He found out from me that I was in the same grade position as the one got promoted to a year back. He was thereafter generally very nice to me. But telephone from Calcutta rang again advising me to return to Calcutta at the earliest. I returned from Dibrugarh to Calcutta after spending 10 days on impressionistic survey of gatherring information and having a feel of the district of Dibrurgarh. Within a few days of my return, the historic War of Independence of Bangladesh from Pakistan began.
The country's districts were allocated to the State Bank of India Group and the 14 banks nationalized in 1969. Thus each of these banks had become Lead Banks in respect of certain districts. United Bank of India, my employer was allocated about 14 districts as its lead districts. The Reserve Bank of India and the Finance Ministry formulated the Lead Bank Scheme. The Lead Banks were made responsible for ushering in economic development in their lead districts by taking the Lead and coordinating role in broadening and deepening the banking network. This would mean tapping unused/ idle financial resources to convert them into bank deposits and extend credit assistance to all kinds of economic activities in the rural areas. The Lead Bank Scheme became the focal point for formulating and implementing area development plans in the districts. But the first task was to know more about the disticts' economic status and condition and then formulate appropriate District Credit plans.
One of the task of United Bank's Research Division was to publish Lead District Economic Survey Reports. Being one of the officers of Research Division, I had been allocated a few districts for completing the Survey Reports. For each of the lead districts certain information was already collected by commissioning the help of local college/ university professors. This had been done even before I had joined the Bank. Based on such information, the Lead Bank Survey Report on Tripura - a full-fledged State of the Indian Union, but a Lead District under the Lead Bank Scheme because the size of Tripura was relatively small then - was published by the Bank. That was given to me as a model to start with along with some 20 to 30 statistical tables compiled by the outside agencies on behalf of the Bank and the district gazetteer published by the State ( in most cases, these were not updated after Independence by the District Administration). So, the task was relatively simple. Most statistical data were either based on Census or surveys by State agricultural departments or the Annual Survey of Industries and very little of information was generated through primary survey. The task was ultimately to identify the growth potential of each districts. It was essentially a task of reducing big tabulations into analytical convenient smaller tables and writing a few pages of report in English and associated proof reading. I had to deal with two districts of Assam and two / three districts of West Bengal. These being in the nature of impressionistic Surveys, and there was very little time available before the Lead Banks were to complete the task, I was not required to even visit the districts on which I was writing out the survey reports, except in the case of Dibrugarh and Jorhat Districts of Assam as there additional information was needed to be collected. What the District Commissioners/ District Magistrate's offices should have done got shifted to the banks after nationalisation. That was part of the process that continued for long to ensure that the Government officials had hardly any work except conducting progress review meetings to monitor the work passed on to the banks and other public sector agencies. Great Design.
For two successive days, I had to come back from the Calcutta Airport because the flight to Jorhat did not take off due to bad weather or availability of aircraft: those were the days when Indian Airlines was only carrier for domestic air travel. The passenger fare for the flights from and to the North Eastern States were concessional and the alternative of Railway travel would have cost more than 48 hours against just 2 hours by flight. That is the reason I was sent by my employer by air: normally a junior officer were not entitled to travel by air in those days of commanding heights of the public sector.
A Fokker friendship aircraft flight took of on the third day noon. My third journey by air in life. The flight to Jorhat was less than an hour. Tea and snacks were served soon after take-off. But before most passengers could sip their tea, the aircraft started jerking. The aircraft lost and gained heights suddenly and frequently with the tea cups and food plates jumping in the air and then falling back on the try-tables. This lasted for about ten minutes before the journey returned to normalcy. We sagely landed in Jorhat airstrip, an air force base at that time hidden on three side by trees on high table lands and rocks. The troubles of the survey journey had not been over yet.
The elderly District Development Officer (DDO) of my bank came to receive me at the Airport. But to our utter dismay, I did not find my checked in luggage at the terminal. On enquiry it was revealed that the luggage was not offloaded in Jorhat and has gone to Gauhati where the flight was supposed to terminate and that I can hope to get my luggage only two days later when the next flight to Jorhal would come from Kolkata.
The District Development Officer's office had an an adjacent room to host guests. I was put up there and I had to prepare mind to the bright prospect of remaining in the same clothes that I was wearing for the next 48 hours. Soon after I had got myself settled in my room, I went to the District Development Officer's room to have a cup of tea and schedule my information gathering tour of the district over the planned seven days of my stay in Jorhat. The DDO would retire in a few years' time and he was very affectionate to me but he had a surprise visitor from Kolkata at that time. This elderly visitor, a Commercial general manager of Indian Airlines, had announced that he had come to meet me as well. Three of us spent about half an hour together before the visitor from Indian Airlines left. But he assured us that my luggage would be delivered to the District Development Office by afternoon the next day when the flight that comes from Gauhati (Capital City of Assam, now named as Guwhati) to Jorhat. We thanked him and the luggage did reach me as promised by him. It is only when I returned back to Kolkata after15 days that I learnt from my parents that the same person had visited them in connection with his search for a suitable bride for her daughter. We have not met at time later.
My bosses at Calcutta telephoned to Jorhat to advise me to cut short my stay in Jorhat and proceed to Dibrugarh where I would be spending another two weeks. On the fourth day of my stay at Jorhat, I took the flight to Dibrigarh - less than 30 minutes journey. The Banks DDO in Dibrigard was a middle-aged person but appeared very enthusiastic about his work and appeared smart.. He had arranged for me a small room in a (no-star hotel) near his office. Before I stated my visits to various government offices, farming centres and commercial offices including those of the oil companies, I had a daily meeting with him. The first and foremost question that he wanted answers to himself was the kind of respect and cooperation that he would deem fit for his so young a colleague from the headquarters. He wanted to place me by my level. He found out from me that I was in the same grade position as the one got promoted to a year back. He was thereafter generally very nice to me. But telephone from Calcutta rang again advising me to return to Calcutta at the earliest. I returned from Dibrugarh to Calcutta after spending 10 days on impressionistic survey of gatherring information and having a feel of the district of Dibrurgarh. Within a few days of my return, the historic War of Independence of Bangladesh from Pakistan began.
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