The new avatar of banks

For 23 years, I worked with Canara Bank. I recall in the days when I had newly joined, nationalised banks were growing very fast because they had just stepped into a wider arena from a localised private bank to a public sector bank spread all over the country. Every bank was recruiting personnel in thousands every year. I am proud that I got an opportunity to work for Canara Bank, which grew from very humble beginnings to become very popular.

Ammembal Subba Rao, a renowned philanthropist, established this institution with the good intention of saving poor farmers from the clutches of greedy moneylenders. Being a social activist, he worked for the emancipation of farmers and education of girls. Until the 1980s, the bank wore a very humble look, though it had spread its presence all over the country and was meeting all the requirements of the government as a nationalised bank.

Over the years, as the economic policy of the government changed and markets opened up rapidly, the bank too geared up its activities and looks to suit the new generation customers. Year after year, newer schemes, newer products and newer concepts started evolving. The bank’s head office is in Bangalore - the silicon city of India. The bank now has had to further tune up to face the stiff competition from foreign and multi-national banks, besides the hundreds of private banks that have sprung up to meet the increasing needs of the ever growing IT and BT clients.

The yesteryears

In the seventies, nationalised banks had almost monopolised the banking sector, especially because they were used by the government as a tool to implement many development policies in the rural sector. Social banking was the ‘in thing’ then and profit-making was secondary. I remember how even an ordinary customer had access to the chairman’s chamber, as the policy was ‘customer is the king’.

The minimum balance to open an account was just Rs.5 (five rupees). Loans to the priority sectors – agriculture, small and medium business outlets, small scale and cottage industries, the people below poverty line - were most important and the government followed up this policy regularly. Expenditure on physical appearance of the bank was considered wasteful and hence limited to the bare minimum. I remember how we used to scramble to get our single pen and follow-up diary, every year on 1 January!

Changing face

However, in part due the change in the economic policy of the government, all banks have had to change their policies and looks. In fact, recently Canara Bank changed its logo too. All the branches and offices have received a facelift and wear a posh look similar to foreign and private banks. Social banking seems to have shifted to second place.

Unless the nationalised banks compete with the foreign and multi-national banks in service, profitability, products and approach, they can no longer stay in the market. Just like Canara Bank, the other major banks which originated in a humble way in Karnataka like Syndicate Bank, Corporation Bank, Vijaya Bank and Karnataka Bank also rose up to the occasion and quickly changed their looks and policies to suit the new generation customers.

No private bank or multi-national bank or foreign bank entertains customers who cannot maintain a minimum balance of Rs.1000 or even Rs.10000 sometimes. But a nationalised bank cannot reject small customers.

• Bridging the banking divide

Humble looks are no more popular. Terms like ‘marketability’, ‘products’ and ‘sale’ have entered the banking sector, where earlier, deposits, advances, service and social responsibility were the main terms. Computers have entered the banks in a big way, replacing huge ledgers as also a large number of employees. Today, the average age of employees of any nationalised bank is around 48-50, because recruitment was cut. High flying executives with MBAs and MCAs as well as Chartered Accountants and Cost Accountants have been directly recruited to bring a new management breed to these banks.

Though customer is still king in all banks, small customers are no longer sought after. If a bank has to stay in the market today, it has to earn profits, for which it has to have clients who will borrow more and repay promptly. Consumerism has engulfed this field just as it has entered all other spheres. Consumer loans like home loans, vehicle loans and education loans have become very popular as the banks are assured of prompt repayment.

In cities like Bangalore, the infrastructure of the city is getting a great boost and this is another field where the banks have a very fertile source of income. So, which bank wants to bother about the Rs.5 customers or the small borrowers?

Nationalised vs. private/foreign/multinational banks

Nationalised banks are still compelled by government policies to lend to the priority sectors and meet targets and hence they are tied up to that extent. Hence, they find it difficult to compete with the private/foreign/multi-national banks, who have a free hand in devising their own methods to woo customers and make profits. For instance, no private bank or multi-national bank or foreign bank entertains customers who cannot maintain a minimum balance of Rs.1000 or even Rs.10000 sometimes. But a nationalised bank cannot reject small customers.

The service charges in nationalised banks are regulated by the government/RBI but the private/foreign/multi-national banks have their own set of service charges. Nationalised banks cannot bar any customer from entering the premises or discourage him by charging a fee. But the other banks limit the number of customers from physically going to the branch, by charging a fee. Thus at any given time, a branch of a public sector bank will be teeming with a crowd of customers right from a person wanting to draw Rs.50 to an industrialist waiting for his loans to be sanctioned. There is chaos and there is bound to be delay in serving the customers.

Governments are using nationalised banks for all their financial dealings like collection of cesses, taxes, bills, sale of securities and so many other things. But the other banks have no such compulsions.

Nationalised banks have to act within specific limitations as far as the cost of selling the products and pleasing customers goes. The other banks are free to fix their own limits and use any method to attract customers. All cellphone users today know how these private operators market their products! But a nationalised bank cannot do that.

The employees of nationalised banks belong to unions and hence the working conditions, hours and rules are all very specified. However, private operators use contract labourers, who go from house to house or office to office for marketing during any time of the day. This is also the case for recovery. Nationalised banks can only rely on formal methods of recovery, while the private operators have their own recovery tactics and need not really follow any set pattern.

When it comes to numbers of branches in the cities, there are differences too. While nationalised banks like Canara Bank and Syndicate Bank have established their presence in almost all localities of the metro, private banks could function with a fewer number of branches. The range of customers and the number are too high in nationalised banks, right from destitute pensioners getting a pension of Rs.300-500 p.m. to public limited companies. Though business-wise, nationalised banks may also have a big share, they are also serving larger numbers of customers. Private banks on the other hand cater to only middle class and rich customers, because in many of the banks, and as noted earlier, the minimum balance to be maintained is around Rs.10000 and the service charges for defaults are very high.

Employees of private banks feel they have better infrastructure and facilities to serve the customers. ICICI Bank, for e.g. has a 24-hour customer care centre and complaints and requests are to be attended to within 36 hours from the time of lodging.

We could go on and on. The changes that have crept in this field, especially in major metros (like Bangalore, where I worked at Canara Bank) are very drastic. What have the bankers and clients to say in this regard?

T V Raghavendran, a chartered accountant, says, “I do bank with both nationalised and private banks. However, as far as service is concerned, I rate the nationalised bank at 5 on a scale of 10, while an Indian private bank definitely stands at 7 but I would rate a foreign bank only at 5. Though private banks have an edge over nationalised banks in pleasing customers, nationalised banks have to stay in the market merely for their strength of topographical coverage and stability. I welcome automation but prefer a mix of personalised approach and machines. Customer complaints are attended to faster by Indian private banks than the nationalised banks and even some of the foreign banks.”

T S Gururaj, an IT professional, working in a multi-national company rates a nationalised bank at 5 and private bank at 7. “Yes. Definitely, private banks have an edge over nationalised banks in the matter of customer satisfaction. However, nationalised banks have to remain in the market merely as competitors for the private banks. As far as my experience regarding complaints goes, no bank is better. One advantage in a nationalised bank is that the executives can be approached easily, while in a private bank it is very tough to meet a responsible executive in person. Though I welcome mechanisation for mundane activities, I prefer personal approach for sorting out complaints or advising investment solutions. I would definitely like to bank with a private bank only because it is more customer friendly”, says Gururaj.

Loss of personal touch

All said and done, the personal touch that existed in banking service years ago has gone. I remember how one of my managers used to feel proud to serve valued customers like Professor V K Gokak personally. She used to go to his house to hand over the cash and collect the cheques. Another manager felt it was a life-time opportunity for him to serve in the Indian Institute of Science branch, where he could meet great stalwarts and scientists like Professor C N R Rao. He would not avail even a single day’s leave in a whole year, because for him bank was more important than his own family!

Of course, machines have come in handy to speed up many activities, but it is sad that the persons at the counter are so engrossed in clicking the right button on the computer, that the physical presence of the customers is hardly noticed or liked. In fact, many of the customers of private banks hardly know where the branch is situated, because all the work is done online or through messengers! If anything, it is the wish of many of the customers that they be treated like human beings at least at some time, instead of with mere customer IDs and robotic voices!