IN DEFENSE OF PUBLIC SECTOR BANKS

IN DEFENSE OF PUBLIC SECTOR BANKS

 

 

‘These PSBs never improve’, ‘I told you so, look at these gen next banks, they make it easy’, I got the DD home delivered’, ‘totally hassle free’. Praises plenty to these gen next banks and PSBs score sheet in comparison is hardly a match. Is it for real? Does it mean the end of the road for PSBs? Or is it that these gen next banks alone have license to ‘efficiency’? Spare a moment.  Let us make a dispassionate dissection of both and probably then you will know how (un) fair is the comment.

Consider this:

Focus	PSBs	Gen next Banks
Area of operation	Remotest possible areas of the country	Only big cities/towns, metros, state capitals
Clientele	Unrestricted entry-all persons eligible as per rules of bank/govt can enjoy banking operations	Mainly creamy layer of the society-MNCs, big corporates, High net worth individuals
Technology	Up gradation still in infancy	It is their main forte
Personnel	Average age is 40+	They hire only youngish, fresh-from-college faces
Computer literacy	Still a long way to go	Strict ‘no-no’ to computer illiterates
Freedom of operation	Limited-govt/politicians interfere in banking business	No such compulsions
Reporting/accountability	Millions of reports on banking transactions sought by various govt bodies-saddled with huge paperwork	Bare minimum paperwork and reporting
Huge stock of bad loans-mainly small loans	Banking reforms revealed huge stock of NPAs, particularly large no of small accounts requiring service	No such problem of servicing small accounts. Contend with few no of NPAs(in absolute no)
Mindset/attitude	Contend with ‘difficult to change mindset’ of ageing colleagues	Easily maneuverable/adaptable work force
Protective atmosphere	Less incentive for performance	Package linked directly to performance
Product pricing	Social responsibility makes it difficult to look at transaction purely from commercial angle	Totally free to offer prices to suit their ‘commercial interest’

 CUSTOMER COMPLAINTS:

Customer profile of the PSBs is so wide and varied, from a 70-year-old pensioner to that of a corporate giant. There is no way they can discriminate between an average customer and a high-profile one. Social responsibility on PSBs is so huge that they have little leverage on this count. Even a minor lapse invites the attention of top most executives and consumes lot of time in settling the matter.

Contrast this with gen next banks. Majority of the aggrieved do not lodge protests/complaints mainly because, there is no way they can come in direct contact with them. Most of the business is done thro’ DSAs (direct selling agents). And if a customer wants to protest, he has to first contend with the helpline, famous for its never ending list of directions to punch this no or that depending on each category of complaints. The very fact that he has to face a faceless person makes the task that much tougher. And each time he punches the number as instructed, he is made to wait interminably, forced to listen to the music he never wished, by which time he would have lost all the appetite for a brush with the authorities. Trust me, dealing with faceless people can be a very daunting task and certainly not for the less privileged who are not used to such negotiations. So most complaints would never get there in the first place, let alone being dealt with.

Contrast this with PSBs. At least the aggrieved can directly walk into the office and have a face-off with the bankers at their chosen time. This is not to suggest that this is a welcome feature. But if you hold a survey on the preference of customers on this count,- prefer gen next banks’ faceless faces OR PSBs people with always available label on them, we are sure PSBs would win hands down. So, don’t write-off PSBs.

SOCIAL RESPONSIBILITY:

Even after 15 years of economic reforms, PSBs role in financial support to agriculture, industry(small and medium), infrastructure, the less privileged like the rural poor/urban lower and middle class family is even more significant. Despite the strong ground for closure/relocation of rural branches on commercial viability, PSBs have fought off the infinite temptation to do so. You know why, they owe it to the society, the less privileged, the masses, the old and the pensioners who simply cannot be wished away and who can ill-afford these ‘gen next banks’. It is akin to a situation where the aged ones in a family are ignored for their ‘economically unviable’ status!! Commercial viability alone can never be the raison d'être for the existence of an activity, be it financial or otherwise. Agriculture, small and medium industries require directed lending at soft interest rates. And PSBs are doing a commendable job in funding them at places where no gen next banks would dare. Here again a big credit entry in the score sheet of PSBs. So don’t write-off PSBs. Not yet.

TECHNOLOGY:

Gen next banks are born with clinical precision, not for them the overweight of NPAs. Not for them the operational shackles. They are miles ahead of PSBs. But then, PSBs are slowly but surely catching up. PSBs are busy signing up deals with MNCs for implementing core-banking solutions/networking. Over 70% of PSBs business is computerized. PSB personnel have realized much sooner than one imagined, that to compete it will have to shape up. And are responding to the situation in a matured manner much to the delight of powers that be. Otherwise how could you explain large-scale investment in technology by PSBs. Left is thinking right in probably diluting its stand on investment in technology. So here too, PSBs are inching upwards in score sheet. So don’t write-off PSBs. Not yet.

PERSONNEL:

Lean and mean and business like never meant a thing for PSBs some 15 years back. Life has come a full circle for them (or, has it) and they are beginning to look mean and businesslike (not so sure about them being lean). No longer do they tolerate mediocrity. They are becoming less and less indifferent to customer care. It must be confessed here that PSBs owe it to these gen next banks for waking them at last. They have realized albeit belatedly that customers are not the only thing, in fact, EVERYTHING! So don’t be in such a hurry to write-off PSBs. Not yet.

COMPUTER LITERACY:

Disappeared are the days when PSB staff was less keen to roll their fingers over keyboards. Gone are the days when you witnessed them holding the mouse as if they were holding dynamite! There is a sea change in the attitude towards learning new things, particularly computers. So much so that some of the PSBs figure in the list of winners for the development of technology in banking software! Would you believe that? Sure enough, it is true. So would you be still willing to write-off PSBs? Not so sure, eh!

OPERATIONAL FREEDOM:

PSBs were expected to perform magic with their limbs tied. Thanks to liberalization, much needed freedom has been injected to the banking system. They can play in certain sensitive sectors like capital market, real estate sector which were a strict ‘no-no’, of course with usual caveats. They are encouraged to set up their own risk management system with regard to asset-liability mis-match, industry risk, credit risk etc. All this has led to PSBs honing their skills that were the copyright of privileged few. PSBs are now free to price their products depending on their risk taking/sustaining propensity. Slowly but surely, PSBs are catching up. Beware, gen next!

HUGE PAPERWORK:

This is one area where gen next banks have tremendous advantage over PSBs. While it is almost paperless for gen next, PSBs seem to be enveloped by huge amount of paperwork, its attempt at containing it notwithstanding. This cannot go on. It has to find ways to get rid of this habit of ‘reporting everything to everyone’. And most of what it has reported would be fast gathering dust some place somewhere!! It is a bit of ‘iffy’ area for PSBs. Of course, they would be already thinking along these lines and are likely to find a solution much sooner than later.  Well, hang on, PSBs.

HUGE STOCK OF SMALL (IN NUMERICAL) NPAS:

The reforms in banking sector has played havoc on the bottom-line of banks, more so with PSBs. Banks were just content in debiting interest on loans and accounting it as income without ever bothering to check whether it was realized.  And show unreal growth year after year. The blunder was realized in early 1990s. The result, huge amount of NPAs and most of PSBs bled and shred their imaginary profits. On the contrary, gen next banks had no such problem, as their focus was on creamy layer. Yet PSBs weathered the storm and took appropriate measures to curtail this NPA menace and most of PSBs have shown consistent growth in business. You can measure the success by their ability to shrink their NPA level, diluting government holding by going to market and the image they are creating for themselves over the past several years. No mean achievement, by itself! All this, despite the ever tightening norms for classifying its assets and ever increasing provisioning norms!! All this, despite the slow pace with which legal reforms are taking place. On the one hand you are tightening the noose by stricter norms on provisioning, on the other you are causing more suffocation by slow pace of legal reforms. Recognize the irony? Yet, PSBs are standing tall. And you want to write obituary of PSBs.

 MINDSET/ATTITUDE:

PSBs have to contend with staff whose average age is 40+, could be even on the wrong side of 40s. expecting them to adapt to state-of-the-art technology is tantamount to expecting Sunny Gavaskar to score a hundred in a 20/20 cricket match!! Also, the management and the staff did not see eye to eye on many issues like greater involvement, commitment and greater concern for customers for a very long time, which probably explains the ‘unwillingness’ or the ‘not-too-keen’ stance of the staff. This stance is of course on the decline.  On the other hand, gen next banks hire the young/fresh-from-college, who are born with ‘mouse in their hand’. They stand a better chance of excelling in this aspect as they are made to ‘focus’ from day one of their career on the bank’s goals. Yet much water has flown since then and PSBs have begun to treat HR matters seriously and have designed and developed training programs to reskill the staff to suit the present environment. Of course much needs to be done though. Yet you can see the gradual shift in their attitude and mindset from one of ‘indifference’ to more sensitive and professional in their approach to business and customers. So PSBs are making their presence felt and are up to it, right!

PROTECTIVE UMBRELLA:

Very sensitive issue. PSB package has never been linked to performance. It is probably one of the main reasons for its performance (or the lack of it). This raises host of issues like, exit policy, labor reforms, competition & social security. ‘Work according to your capacity and take according to your necessity’ is too idealistic! But then, somewhere we have to draw a line between what is termed as management hostility and workers’ blackmailing ability. Ideally there should be a policy to reward your star performers. Equal pay for equal work is unlikely to fetch good results. It is in fact counterproductive as it is a big disincentive for top performers. May be we can even think of fixing assured package for the UNINITIATED and higher package for those willing to stretch that bit further and show performance beyond expected level. This way both will be benefited and is less likely to cause industrial unrest. Because, workers too will realize that their social security is taken care of and that for the more aggressive and career minded, there is suitable incentive in the form of higher pay. Of course, the definition and quantum of ‘assured pay’ could be settled at industry level negotiations. And definition of what constitutes ‘performance beyond expected level’ could be left to individual organizations. This way you can have the cake (the comfort of assured pay for the less inclined) and probably eat it too (luxury of enjoying higher pay for top performance for those who have it in them)!! 

Compare this with what is happening now:

‘X’ is less willing and not really inclined to be creative, even less willing to stretch that bit further.

‘Y’ is extraordinary displaying tremendous creativity and is ‘x’times better than ‘X’ (forgive the pun)!!

The irony: both get similar pay under present set up. This is where the suggestion of graded pay for top performance comes in to play. ‘X” can’t complain, as he is getting an assured pay. ‘Y’ is happy because his contribution is finally recognized and rewarded. This in my opinion is the definition of “LABOR REFORM WITH HUMAN FACE”. While retaining the social security, it still creates an enabling atmosphere to show top performance. If we can debate and discuss on these lines, probably we would be “LEFT” less intolerant of these reforms.

This protective umbrella enjoyed by the PSBs is absent in gen next banks where they hire people on contract basis.

PSBs have been up against it. They had to work against such heavy odds that few gave them chance. Yet they survived the initial scare. They have adapted fast and are matching the gen next banks, in almost every activity. You name it, they have it, ATMs, connectivity, instant funds transfer, home banking, tele- banking, credit/debit cards, insurance business, investment portfolio. All this has made PSBs VIABLE AND VIBRANT in every sense of the term. PSBs have learnt to live with the present without forgetting the past. PSBs have learnt to embrace technology without ignoring the traditional values like carrying along with them the banking aspirations of millions of poor section of the population, shouldering the social responsibility of rural finance. PSBs have learnt to brush shoulders with corporate clients without ignoring the less privileged. The high profile clients can afford to make a choice between PSBs and gen next banks. But common populace have only one choice and PSBs have not let them down, so they don’t have to run around trying to locate faceless people in times of problem, so they don’t face frustrating moments in seeking prior period statements, so they don’t have to pay for entering the bank premises and myriad such things. So PSBs have proved that you don’t have to shun social responsibility in order to be commercially viable.  SO, IN PSBs, WE TRUST(forgive the pun)!!