An account closes: Allahabad Bank looks back with nostalgia before merger

The merger marks the end of a bank in which two states with contrasting identities - Uttar Pradesh and West Bengal - took equal pride

In Satyajit Ray’s detective fiction Joi Baba Felunath, a hotel manager makes the protagonist, Feluda, familiar with the crème de la crème of Kashi.
 

Among the important people of the town, the first reference is to an agent of Allahabad Bank, employees were known as agents then, followed by prominent academics and businesspersons. That's the kind of prestige the mid-sized public sector establishment commanded till about a few decades ago.
 

With Allahabad Bank set to be amalgamated with Indian Bank, the legacy of the oldest existing joint stock bank in India is set to fade. It also marks the end of a bank in which two states with contrasting identities — Uttar Pradesh and West Bengal — took equal pride.
 

Today there are more protest marches against the amalgamation in Allahabad, where the bank was born, than in Kolkata, where its headquarters is located. Although in both the cities the angst of losing a historical identity runs deep, Allahabad saw its genesis. While in West Bengal, there are close to 600 branches of the bank, in UP the count is about 1,000.
 

“People have a strong bonding with Allahabad Bank in UP. For the past few months, we were working even on holidays to ensure its turnaround. It is a bank with a rich heritage and history, and naturally there is a sense of loss of this prestigious identity among the employees,” said R N Shukla, state secretary, UP, All India Allahabad Bank Officers Association.

Biswaranjan Roy, national president, All India Allahabad Bank Officers Association, said: “Allahabad Bank has withstood economic depressions, political upheavals, the pains of partition, the post-independence change in the guard, and the evolution of the Indian economy. With the amalgamation, we are losing a heritage institution.”
 

Set up in 1865, Allahabad Bank was mostly nurtured by the Scots, known for their prudent banking. It was set up at a time when the Presidency Banks ruled the roost, and private-sector banks were short-lived. While a number of foreign banks had established set-ups in India in the mid-19th century, booming trade in Allahabad, well connected with the railways, necessitated a local bank.
 

The bank commenced operations on the first floor of a building in the busy Chowk area in Allahabad. In the initial years, it cautiously stayed away from profitable businesses like export finance and foreign exchange. Most credit proposals were vetted at the board level and several were turned down. In the first eight months, the net profit of the bank was Rs 2,300, according to a book on the history of Allahabad Bank, released on its 150th anniversary.
 

The legacy of Allahabad Bank is stuffed with interesting anecdotes. Spearheading the job of setting up the bank was a physician, J F Beatson, because of his social standing and credibility, the two values which the bank adhered to. The will of Jawaharlal Nehru was lodged with the Scindia House branch of the bank.
 

To maintain a clean balance sheet, the bank turned down offers by smaller banks for merger. However, in 1920, the P & O Banking Corporation offered a bid price of Rs 436 per share for Allahabad Bank, much higher than its all-time high share price. Finally, Allahabad Bank was taken over by P & O Banking. However, it was kept as a separate entity, but the headquarters of the bank moved to Kolkata.
 

In 1927, Chartered Bank of India, Australia and China took a controlling interest of P & O Banking, thus making Allahabad Bank its subsidiary. In 1969, Standard Chartered Bank was established through a merger of Standard Bank of British South Africa and Chartered Bank of India, Australia and China. Allahabad Bank was still allowed to maintain its separate identity.

After independence, Allahabad Bank was treated as a foreign enterprise, but its profits rose from Rs 16 lakh in 1955 to Rs 17 lakh in 1960. The bank continued to have Britons in key positions, which also led to agitations in Kolkata.
 

In 1969 Allahabad Bank was nationalised, with the argument being that as Allahabad Bank had both its head office and registered office in Kolkata, for all practical purposes it was an Indian bank. Thereafter, about £1.3 million was paid in annual instalments to Standard Chartered Bank.
 

In the first year of nationalisation, the bank’s advances grew substantially, largely due to priority sector lending and the Green Revolution. The post-nationalisation period marked the turbulent journey to transform for Allahabad Bank from a bank of nawabs and rajahs to one of farmers and artisans.  
 

By late 80s, most public sector banks were ridden with high non performing assets due to poor operating efficiency and imprudent lending. Allahabad Bank was not immune the NPA crisis. By 1994-95, the gross NPA to total credit of the bank stood at 26.9 per cent. By 1998, Allahabad Bank was in the list of weak public sector banks of RBI, where the accumulated losses and net NPAs exceed the net worth of the bank. Subsequently, the bank adopted a strategy to focus on non fund and non interest income, while focusing on NPA recovery. Revaluation of fixed assets were done, leading to addition of Rs 127 crore to the balance sheet. The gross NPA reduced to 14 per cent by 2002-03. The bank went for an Initial Public Offering in 2002, with its issue oversubscribed by 3.68 times.

By mid 2000s, the bank was in profit trajectory, but the financial crisis of 2008 and  subsequent phases of economic slowdown weighed heavily on the bank. By late 2017, the gross NPA of the bank was close to 15 per cent and by January 2018, Allahabad Bank was under Prompt Corrective Action (PCA) framework, which put curb on certain lending, by RBI. The PCA got lifted earlier this year after government fund infusion of more than Rs 6000 crore in the bank.  However, the ageing provision for NPAs continued to wipe profitability. For entire 2018-19 financial year, the bank's net loss expanded to ₹8,457.38 crore and its gross NPA ratio stood at 17.55 per cent in FY19.

The bank owns prestigious properties in the country, including in Parliament Street in New Delhi, Peddar Road in Mumbai, and India Exchange Place in Kolkata, apart from heritage properties in places like Allahabad, Nainital, Meerut, Jhansi, and Kanpur. The sprawling headquarters is on 2, N S Road, which belonged to the Maharaja of Burdwan. In a few months, as the buildings will get a new signage, it will also mark the end of an era in Indian banking.