Usha Thorat: Ensuring dignity for the Indian customer - tasks head for
Indian banks
Address by Ms Usha Thorat, Deputy Governor of the Reserve Bank of India, at the
61st Annual General Meeting of the Indian Banks' Association, Mumbai, 26 May 2008.
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Ladies and gentlemen,
It gives me great pleasure to be amidst my banker friends on the occasion of IBA's 61st
AGM.
The activities of the IBA have grown in diversity and scale in the recent period, not in small
measure due to the dynamic leadership of CEO Mr Sinor, who I understood was to have
demitted office on 31st May, but I believe has been persuaded by the Chairman to continue
for a while. Chairman Mr Rao, Deputy Chairmen Mr Khandelwal, Mr Narayanswami and Mr
Nayar have, I am sure, provided their own unique direction to IBA, which has today emerged
as a highly respected body and voice of the industry. In fact, there is hardly any aspect of
banking that RBI would consider without involving and consulting IBA. In particular, I am
happy that many cooperative banks are now members of IBA. I feel RRBs also could
consider becoming members and derive the benefits of such membership. Also, I suggest
that IBA consider reduced fees for smaller cooperative banks and RRBs who could join as
non voting members - they can greatly benefit by the professionalism imparted through such
membership.
For those of us who joined the banking industry in the early 70s, what we see today
represents a dream come true - India, aspiring to be a global player and leader in all fields,
adopting and setting best practices in every way - I wonder how many of us imagined that
we would see this happen during our career. Having said that, I would hasten to add, as
Robert Frost put it, there are miles to go before we sleep. There is always an unfinished
agenda -that truly represents the challenge of a banker's job!
Talking about leaving behind matters that are of true value, I recollect a truly inspiring speech
given by Subroto Bagchi of Mind Tree to the IIM Bangalore class of 2006 and I quote (Mr
Bagchi's father was in Government service):
"Government houses seldom came with fences. Mother and I collected
twigs and built a small fence. After lunch, my Mother would never sleep.
She would take her kitchen utensils and with those she and I would dig the
rocky, white ant infested surrounding. We planted flowering bushes. The
white ants destroyed them. My mother brought ash from her chulha and
mixed it in the earth and we planted the seedlings all over again. This time,
they bloomed. At that time, my father's transfer order came. A few
neighbours told my mother why she was taking so much pain to beautify a
government house, why she was planting seeds that would only benefit the
next occupant. My mother replied that it did not matter to her that she would
not see the flowers in full bloom. She said, "I have to create a bloom in a
desert and whenever I am given a new place, I must leave it more beautiful
than what I had inherited".
That was my first lesson in success. It is not about what you create for
yourself, it is what you leave behind that defines success."
I often feel that being a banker is probably one of the most satisfying professions in the world
-like being a doctor it gives you an opportunity to render service and make a difference to
people and to society. It involves nurturing entrepreneurs, helping businesses grow to
become large corporates and MNCs; empowering people, helping them realise their goals by
giving them education loans and loans for their enterprises; providing the "blood circulation"
viz, the payments system for the financial system - all this and more. Secondly, a banker is a
person of substance in the society. Being a banker involves constant human and social
interaction with a wide cross section of public - an enriching and satisfying experience. The
third most satisfying part of a banker's job is that one continues to learn new things about
practically every field of activity - agro tech, bio tech, software, steel, cotton textiles, cement,
infrastructure and innumerable others - it is a profession where one can be most creative
and one that challenges the intelligence and wisdom of the best. You are privileged to be a
banker!!
I am truly impressed looking at the breadth and depth of activities IBA has been involved in
the past year - Basle II preparedness, payments and settlement system, legal interventions,
consumer protection, accounting standards, IT usage, financial crime and financial inclusion.
Each of these areas by itself represents a huge amount of research, dedicated work, and
coordination. Other impressive initiatives include setting up of Cordex, a section 25 company
for pooling of risk data and operational loss data, participation in the BCSBI, launching a
financial education portal and, what to me is the most exciting initiative, the possibility of
unique customer identity across banks. The impact that IT can have on financial inclusion is
unimaginable and the IBA's initiative to evolve common standards for this purpose is
laudable. That India has arrived is reflected in admittance of IBA in the IBFed of six major
bankers' association from the developed countries. I am sure that the Indian banking system
can provide leadership in quite a few areas. One area in which I know we are international
leaders is in providing low cost, biometric identified bank accounts through smart cards,
mobiles and hand held connected devices to ensure universal access to banking.
Having praised the IBA management and members for their work and initiatives in 2007-08,
let me turn to a few areas where I feel there is much to be done. In any forum of the public
that I address, be it citizens forum, Rotary, SHG groups or others, one feedback that
regularly comes is opening of a bank account is still quite a chore and full of hurdles; not
every bank branch offers no frills or basic banking account and not many branch staff are
aware, or even if aware, are willing to open a simple account where RBI has specified a
simplified KYC for accounts with low level of transactions i.e. where balances do not exceed
Rs 50000 and credits are not more that Rs.1.00 Lakh a year. Maybe in 2008-09, IBA should
get its members to adopt software to be able to monitor these two conditions online, so that
branch staff can confidently open such accounts without worrying that they may inadvertently
be KYC non-compliant! Similarly, how many of you can confidently say that all of your
branches provide cash exchange facilities and coins to walk in customers? How many of you
can confidently say that you render this service at least at all currency chest branches?
Unfortunately, our incognito visits have revealed that seldom are such services offered to
walk in customers and even for regular customers, it is rarely a counter service. In fact, my
personal experience during incognito visits is far from encouraging. A bank branch in any
location should offer some basic banking services such as currency, remittances, basic forex
(with CBS this should not be a problem) as also shared ATM. When we license a branch, it is
like providing a public good in that area, like electricity or telephony and I feel the spirit of this
licence has to be respected.
In the area of customer service the cherished principles in treating customers fairly are
transparency, reasonableness, truth in selling, confidentiality and assistance when needed,
apart from effective grievance redressal machinery. However, quite often one comes across
cases of complaints where these principles are hardly followed and the customer feels
treated unfairly - for every one person who files a complaint there are probably 99 others
who do not.. IBA, BCSBI and Banking Ombudsmen's Offices are the three pillars for better
customer service and we need to see that our dreams in this regard are achieved.
I would now like to turn to areas where I feel banks may need to give strategic focus and
evolve products, processes and have in place people with capacities to translate strategies
into action. These are in the fields of agriculture, unorganised sector and supporting skill
formation of every type. In agriculture, the need of the hour is efficiency, supply chain
management and technology for improving production and productivity and strengthening
link to markets both for inputs and output. The National Development Council found that
there are several yield gaps across States indicating that there is potential for yield increase
by investment in agriculture. This would call for new strategies for better credit delivery and
credit culture in agriculture. In the last 10 years or so, it is found that the occupations that
have generated maximum jobs are IT, ITES, construction, retail trade, hotels, restaurants
and tourism, health care, education, training and consulting. These are sectors where start
up financing, bridge financing, working capital and investment financing are very important.
Banks will need to channelise all their creative forces jointly in meeting the financing
challenges of these sectors. Credit guarantee schemes and operationalisation of credit
information companies can provide a huge boost to these sectors but it will require willing
banks to upscale their efforts in financing SMEs in these and other areas.
I would like to conclude by citing Governor's recent talk at the Institute of Asian Studies at
Singapore where he referred to the "not easily quantifiable strengths" which the Indian
economy possesses. A vast pool of science and technology graduates and the millions of
people who are familiar with the English language are a source of strength. The familiarity
with multiple languages in India prepares the people - and I would like to specifically include
Indian bankers in this category - to adapt better to multi-cultural situations, making it easier
for them to fit into international systems smoothly. In fact, I believe that one of the strengths
of Indian bankers and banking is the versatility in being able to undertake the most complex
financial structures to simple products like gold loans and loans to Self Help Groups - it is
universal banking of a kind that is not so universal. In his speech Governor also referred to
the "demographic dividend" seen as an inevitable advantage, provided pre-requisites such as
skill-upgradation and sound governance to realize it are put in place. He said that perhaps
we should track not only the addition to the number of billionaires in India but also the
depletion in the number of millions of poor and unemployed. Summing up his talk, Governor
observed "For some, Indian economic progress signifies the beginnings of a major economic
powerhouse in the world. But for many of us, the optimism over the medium-term is only the
beginning of an arduous journey to ensure basic nutrition, clean water, safer sanitation,
minimal housing, personal security and individual dignity for millions in India".
Indeed, fulfilling the basic necessities of life, providing essential services and ensuring
individual dignity for the millions in the country continue to be the major challenges. Banks
have a significant role to play in addressing these challenges. I am sure that you will all rise
to the occasion, and in doing so, the IBA can only grow from strength to strength!
Thank you.