150,000 bankers to discuss how to make India $5-trillion economy by 2024

More than 150,000 branch managers of public sector banks (PSBs) brainstormed over the weekend on what could be the banking system’s contribution to double the size of the economy to $5 trillion by 2024, with an additional aim of holding an impromptu performance audit of branches.

This is the first level of a three-level exercise, done under the behest of the department of financial services of the Ministry of Finance. The two-day branch-level meet will be followed up by a state-level meeting, convened by a lead bank on August 22-23. Sometime early next month, dates have not been fixed yet, the finance minister would be meeting the MD and CEOs of all banks, along with senior finance ministry bureaucrats to work on the recommendations received.

The branch managers came up with some innovative suggestions. For example, branch managers suggested that in view of repeated debt waivers in the agriculture sector, it was necessary to create a nationwide sinking fund to take care of environment-related stress. Such sinking fund can be contributed by the state government, central governments, and the banks themselves and relief can be extended from that fund, instead of hitting the bank balance sheets through repeated loan write-offs. This will also help farmers double their income in five years, a key aim of the Narendra Modi government.

The reality is two third of the credit in the system is through PSBs. Today, if you want revival of the economy, you have to depend on PSBs. And, that’s what we are telling the branch managers. We are telling them that this is the time where you need to prove that we are strong enough to reactivate ourselves, says Rajkiran Rai, MD, Union Bank of India

Another idea was to reduce the window for cash exchange and deposits in branches. For example, the window can be reduced to two hours daily in which cash can be handled, and the rest will have to be compulsory through digital means, at least in Metro areas.

“But this is by no means inconveniencing the customers. It is just a thought,” insisted a zonal manager of a Mumbai-based bank.

Also, to contain high bad loans in the MUDRA scheme, the managers suggested that a national portal be floated to verify the borrower and whether multiple lending has happened. The small ticket size customers are not fully captured in any data base and there is credit history yet.

The state-level meeting will filter all the suggestions, which will again get filtered at the national level.

So far, it has been a top-down approach for banks, now we are trying to undertake a bottom’s up approach… The aim is also to make the officials at the branch-level feel part of the process. They will feel more responsive and responsible for what they do, says A K Das, executive director, Bank of India

The branch managers all assembled in their respective zones, and in lots of 60-70, they discussed grassroots issues, apprising the senior-most executive present, zonal manager to the managing director whatever the case may be, about practical problems and ways to sort them out.

The mega branch level consultation meet in the banking sector will not only help align the public sector banking system with national banking priorities, it will also be kind of a performance audit for bank branches, said Rajnish Kumar, chairman, SBI, who was in Kolkata, for a consultative meeting with six regions of the Kolkata circle.

The banking system largely focused on 10 areas, including overall credit growth; and flow of credit to the priority sector such as agriculture, MSME and housing sectors; credit support for economic growth, infrastructure, industry, blue economy (sustainable use of ocean resources), green economy, export credit, and digitisation. At the state-level meetings, two more factors will be added, such as corporate governance and social sector responsibility.

SBI Chairman Kumar said based on the initial discussions held in various zones, nearly 25 per cent of the bank’s branches may be performing below par, 50 per cent at par and 25 per cent above par, said Kumar.

“This is for the first time that such a massive exercise is being conducted in the banking sector. The idea is, at the branch level, how to motivate employees, take their feedback, and how do we align the public sector banking system with the national banking priorities. Even for the bank, we have never attempted such a massive exercise in the past. It is also some sort of performance audit for bank branches,” said Kumar.

“The reality is two third of the credit in the system is through PSBs. Today, if you want revival of the economy, you have to depend on PSBs. And, that’s what we are telling the branch managers. We are telling them that this is the time where you need to prove that we are strong enough to reactivate ourselves,” said Rajkiran Rai, managing director of Union Bank of India, who held a press briefing on Sunday.

“So far, it has been a top-down approach for banks, now we are trying to undertake a bottom’s up approach,” said Bank of India’s executive director A K Das.

“The aim is also to make the officials at the branch-level feel part of the process. They will feel more responsive and responsible for what they do,” Das said.

On account of high stress in agriculture and MSME sectors, there was a need for new lending models, said Rajnish Kumar.

The high-level of non-performing assets (NPAs) in the farm sector was an issue for banks, and much of it was on account of fragmented land holdings in the sector and lack of modernisation in the sector, he said.

On being asked about the expectations of a stimulus package by the government, Kumar said, “About the size of the stimulus, consultations are going on and the government is speaking by including all banks,” he said.

“There are certain challenges in the retail credit sector, as demand is subdued. There are no supply side constraints. Hopefully with increased government spending, monsoons and festive season, we will see credit demand,” Kumar said.

Kumar did not give a clear response to rate cut, but Rai of Union Bank and Das of Bank of India said they were open to more lending rate cuts in the coming months.