Real-world banking

The Custodian of Trust: A banker’s memoir

Author: Rajnish Kumar

Publisher: Penguin

Pages:  261

Price: Rs 699

Three years is too short a time to make any meaningful impact on any organisation, more so when it’s as large an entity as the State Bank of India. But Rajnish Kumar has come up with an interesting memoir, helped by four factors.

One, Mr Kumar knows how to tell a good story that touches a chord with readers. The substantive part of the book is all of 210 pages and, therefore, a quick read. That and the de-jargonised explanations will be a big draw for readers who may not be familiar with the intricacies of the financial world. For others, some of the “inside stories” of events that are too recent (Mr Kumar retired just a year ago) are worth a read.

Two, Mr Kumar’s tenure coincided with one of the most challenging periods for the banking industry. The list is long: Demonetisation; Asset Quality Review by the Reserve Bank of India (RBI); introduction of the Insolvency and Bankruptcy Code; turmoil in debt markets resulting from the failure of IL&FS and DHFL; the bankruptcy of Jet Airways, the crisis at YES Bank; and the arrival of Covid-19. 

Mr Kumar talks about all this and more.

In the process (and that is the third big draw for the book), the author has pulled no punches. We will come to that later.

Fourth, Mr Kumar doesn’t mind having fun at his own expense. During his school days, for example, he took to acting — which helped him overcome stage fright and made public speaking easier later in life. His first experience with acting, however, wasn’t that pleasant as the play was about a bride selecting her groom, and he had to play the role of a suitor who was rejected owing to his dark complexion. Mr Kumar says this so-called “handicap” stayed with him, leading to other unpleasant incidents later in life.

There’s more. Though he was thrilled to get a probationary officer’s job at SBI (after failing to crack the IAS exam), society wasn’t that kind towards a bank job. On the “dowry index”, marriage to an IAS officer commanded a hefty premium, and even a junior engineer’s job was superior in perceived value to a bank officer’s job.

The Custodian of Trust deals with serious business, too. For example, the failures of Global Trust Bank (GTB) and PMC Bank and the near collapse of YES Bank have led the author to question whether the RBI really has a rational policy for licensing. “The logic for granting licences to individuals immediately in the aftermath of the failure of GTB defies logic… Other than the requirement of a net worth of Rs 100 crore, what was the due diligence for three individuals at YES Bank?” Mr Kumar asks and adds the RBI must come up with a transparent policy on licensing and private ownership of banks.

Regulatory actions have come in for scrutiny as well. Mr Kumar says the then RBI governor Urjit Patel, who was earlier on the SBI board, met him only once soon after his appointment, and closed the doorways for all communication with banks. The mishandling of the post-demonetisation phase finds pride of place in the book, and the author has given several examples to prove his point. The idea of printing Rs 2,000 notes and not enough Rs 100 notes created huge chaos as poor people were scarcely in a position to withdraw such large amounts at one go. Also, the decision to allow bank notes up to a value of Rs 4,000 was not thought through and was grossly misused as there were no restrictions on the number of times one could exchange the bank notes.

A big push to digital payments was one of the ostensible solutions offered. The acceptance structure was inadequate, however, and the country was dependent on imports of point-of-sale machines. They had to be tested thoroughly for security reasons and configured before deployment. “Unfortunately, many officials were blissfully unaware of these limitations, and thought millions of such machines could be distributed as easily as they were like supplying steel utensils,” Mr Kumar writes.

The book raises quite a few questions on other important issues concerning the financial sector. For example, how big is too big to fail or how small is too small to be allowed to fail? The Basel framework provides for additional capital buffers for systemically important banks. But time and again it has been proved that the failure of even a small bank has disastrous consequences for the banking system because of the inter-connectedness factor. The provision of an additional capital buffer offers little comfort as a coping mechanism in case of such a failure.

While minute details about SBI’s way of functioning are already in the public domain and could have been avoided or shortened, some of the anecdotes about his role in YES Bank rescue and the negotiations around Jet Airways make interesting reading.

Elsewhere in the book, Mr Kumar explains why attributing non-performing loans entirely to crony capitalism or zombie lending causes resentment among bankers. “You are damned if you do and you are damned if you don’t,” he concludes. Though that is a one-sided defence, Mr Kumar’s argument will find much resonance given SBI’s former chairman Pratip Chaudhuri’s current predicament.

Though the price is a little steep, the book is an engrossing memoir of a man who is down to earth and a real-world banker at the scene of action — almost always.