Tuesday, June 13, 2006

Perils of Globalisation

We are well into the second phase of the economic reforms. Mergers and acquisitions are making stories in the pink newspapers and the finance pages. What is the upshot of the on-going restructuring exercise? This is the million-dollar question uppermost in the minds of most of us these days.

Being clueless in these areas, we thought we’d ask someone knowledgeable. Our friend Thomas, the grey-haired banker who had called it a day after four decades of service in a state-owned bank, should have, we felt, an answer to the riddle.

Thomas confessed that he did not know what to make of the goings-on in the industry, but he gave us a brief overview of what was happening in the banking world. There is nothing new in all this, he assured us. Earlier, Parur Central Bank had merged with Central Bank of India, followed by Bank of Cochin with State Bank of India. Recent days had seen mergers of banks, like Times Bank with HDFC Bank, and later, Bank of Madura with ICICI Bank and the latest, Nedungadi Bank with Punjab National Bank. More such mergers between banks, old and new, for consolidation can be expected, he said. The shake-out will separate the men from the boys. There are reports for some more mergers but they were in the realm of speculation, Thomas added.

What will be the future structure of the banking sector? What is in store for those working for these institutions? Responding to our queries, he said, "In fact, this question is as old as the hills. Ever since the nationalisation of the fourteen major banks in 1969, there have been debates and discussions on the different models for the reorganisation of banks," Thomas explained.

"Kerala, particularly Thrissur, is the cradle of modern banking and numerous such attempts have been made to consolidate. I’ll tell you the story of Antony and the merger of some of those banks and this might answer your question, at least in part," said Thomas. We were all ears.

"It was in the year I joined the bank that fourteen banks were nationalised. Our on-the-job training programme had stipulated a certain period at each desk. I was assigned to Antony for a month. This stocky fifty-year old man was the clerk handling the Savings Bank desk. A voluble man, always engaged in friendly banter with colleagues and customers. I would sit with him, make entries in the ledgers and the registers and the other books of account. When I made mistakes, he would correct me.

"Though Antony was not even a matriculate, he was efficient at work and a good teacher. He did not know anything about the state of the economy or the impact of the monetary policy, but he knew how to balance the books of account – and at that time, that was enough. He was not worried about things that were not of immediate concern to him. Therefore he tossed aside the newspapers with headlines that cried out 'Major Banks Nationalised'.

"When he heard from the colleagues that reorganisation of banks might be in the offing, he was deeply concerned. Several models were being thought of, he had learnt. Some planners favoured a mega-corporation like the Life Insurance Corporation of India. A bank for agricultural finance, another for large scale industries, yet another for traders and so on was mooted by some policy-makers. The country could be divided into five zones and each zone could have its own bank, suggested a group of academics. Other models were also being proposed for consideration, and Antony was plainly confused.

"In no time, a perceptible change came over Antony. His usually loquacious and cheerful self had transformed into a glum persona. I too noticed the change but thought some personal issue might be eating him. ‘Mr Thomas, do you really believe this restructuring thing will really happen?' Antony asked me one afternoon.

"Being new to the system, I had no clue except what I had read in the newspapers. I said so, but added that any such development will mean better service conditions and brighter prospects of promotion. It would prove to be of advantage to us because we would then belong to a bigger bank.

"That exactly is my worry, said Antony. When I had just turned 20, upon my father’s demise, I succeeded him as General Manager of Pavaratti Kanyamariyam Bank (Name changed) which he owned. Five years later, it was merged with Mary Sahayam Bank and I became Manager. When it was taken over by Knanaya Faith Bank, I got reduced to an officer’s level. A decade back, it was taken over by this bank and I was appointed as clerk. At this rate, if this bank is merged with a larger bank, my fear is that I may end up as a peon … Antony’s voice trailed off.’

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