Financial inclusion and corruption

Hi all,

This post tries to share some examples of how trust is being eroded in Banking. Specially with the new aspect of Financial inclusion which is being banded about.

First of all, its not as I do not trust the banks as I have heard of some stories/incidents as well which also do inspire that banks do also have some good people as well. Of course, the incidents are from a different time but still they matter. Let me share one of those incidents with you.

One of my uncle’s on my mother’s side was a branch manager in one of Old Delhi’s busiest Punjab National Bank branch. The incident is about 50 years ago but is still relevant in today’s time.This was before Punjab National Bank was nationalized.

There was a rumor that spread at that time. The rumor was that, there was some wrong-doing in the branch and hence the branch had become bankrupt.

The rumor spread like wildfire and within half an hour there were long queues till the end of the street, almost couple of kms. long.

The moment my uncle (on mother’s side) reached the branch and he came to know of the situation, he called other branches within the city and asked them to bring cash (as usually branches had cash tied up in longer term loans and norms such as Capital Adequacy Ratio while were aggressive as per today’s standards but still weren’t good enough in cases if issues like this happened.

The next thing he called a branch employee crisis meeting and asked all the branch employees to not panic and co-operate at this needy hour. He asked them to do overtime and offered them lunch and dinner either on office expenses or to ask them to send messages to home to bring lunch and dinner to the branch. Next, he announced that the branch will be open till 21:00 hours.

He also made sure that some of the more experienced employees also had a break of couple of hours so they could sleep and be fresh as they had to tally the accounts later at night when the branch will be closed to public.

One has to remember that these were times when there was no automation of any kind so only the bank employees knew their customers and one couldn’t use people from other branches (as can be done today) .

At 21:00 hours he still saw the queues were as big as in the morning or possibly longer and while he closed for the day, he announced that the branch would be also open on Saturday, which is normally a holiday. He then called up branches beyond the city too, going as far as Agra to get funds to pay people.

The next day, again the same pattern was repeated, both for the employees and the public were paid their money back. Again, at the end of the day it was seen that queues were still there and announced that the branch would be open on Sunday.

Again Sunday, the same pattern repeated itself. My uncle gave confidence to his employees and the payment was done to people.

On Monday onwards, people started coming back and depositing money back into the system. By Wednesday, he was able to send back all the money the branch had borrowed from other branches of the same bank.

While later there was an inquiry, it was found that it was nothing more than a baseless rumor and all was well.

Cut to 2010 and have seen various issues in today’s banking environment.

1. The first experience I had directly was with Indian Overseas Bank. A nationalized bank . I had gone to make a Fixed Deposit in the bank. The deposit slip I was given to credit the amount to the bank had neither a control number and neither was there any date column. I have seen some banks which have control number on their deposit slips while some banks don’t .

Trying to find any information on the (that if RBI site is not user-friendly.

I have few questions in this regard :-

a. Has RBI laid down any rules and specs. for deposit slips for banks to follow ?

b. If there are norms and specs,does it include having a control number and a date column?

c. If yes, what punishment can RBI do if the bank is not following the rule,convention,specs. ?

d. If no, then why aren’t such specs. in place ?

e. In fact, trying to find if there is a PIO (Public Information Officer) posted in Pune, where I could find the above details doesn’t seem to be one in Pune. (Please refer page 33 of the RTI pdf published therein. )

f. In fact the pdf is also silent if what is to be done if there is no PIO posted in the city itself.

g. Why hasn’t the RBI ombudsman updated the other branches of IOB which are in Pune? The RBI ombudsman shows only 3 branches when there are clearly 19 branches as shown in IOB site itself? Try finding the Shaniwar Peth branch details on the complaint form . I used the B.O. office as mumbai and selected IOB from bank name which I don’t know is the right one or not. Also no idea what B.O. stands for ?

I should mention herein that in 2009 IOB took over Shree Suvarna Sahakari Bank whose branch link I have linked above. The bank is around 1 year in operation.

RBI needs to work on their site to make it more user-friendly.

2. The second one which I saw was of a street vendor who sells Dabeli and makes a living of it. The poor guy had opened an account with a co-operative bank called ‘Dharmveer Sambhaji Urban Co-Operative bank‘ which is based somewhere in the outskirts of the city. Every evening or every second evening a business correspondent of the bank with a hand-held pass-book printer comes in the evening and collects the cash. At that time I looked and the business correspondent made an illegible entry in the pass-book. As I am regular customer of him, I asked to see the pass-book, I saw that none of the entries had been entered by the pass-book printer and all were by hand. I advised to get the account checked once in a while by going to the bank branch and making sure the amounts tallied and keeping his own account by hand as well. Whether he does it or not, I was very disappointed to see the same happening.

There is financial illiteracy on the dabeli guy’s end which the bank business correspondent might be using to his advantage.

3. One of the more interesting start-ups has been Eko bank. Now while it seems to be interesting start-up as can be seen in TOI’s Crest coverage there is a caveat there too. One does not know how secure or insecure the system is. Something similar talked about here or here.

All in all, while there are some things to look forward to as new technology comes in, some transparency is also needed in the way banks work. These above examples show that banks are still not in step with customer’s expectations.

An update (12/05/2010) :- I sent the mail to moneylife magazine as I knew Sucheta Dalal (from reputation as well as had met her once couple of years ago. ) She promptly sent the mail to Mr Kaza Sudhakar,
Chief General Manager, Customer Services Department, Reserve Bank of India. While I am yet to hear from him on e-mail she also made an event on the same on 15th of May at 305, 3rd floor, Hind Service Industries Premises, off Veer Savarkar Marg, Shivaji Park, Dadar, Mumbai 400028 (turn left from Chaitya Bhumi, 3rd building on the left).

Moneylife conducts events from time to time on various topics. The idea behind the events is to improve financial literacy among the people. While I’ll not be able to go due to cost-benefit analysis not working out to go there but still it feels cool that one might have been one of the last nails in the coffin (as in figure of speech) which might have resulted in the event being held.

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