Submission #99

Submission information
Submitted by Anonymous
30 June 2016 - 3:54pm
In the wake of Bank Nationalization
Banking and Finance

This narrative discusses the impact of nationalization of banks in 1969. The government, under Indira Gandhi, nationalized fourteen leading private commercial banks via an ordinance in July 1969. Though the idea had been raised in a previous All India Congress Committee meeting, the Banking Companies (Acquisitions and Transfer of Undertakings) Ordinance was issued without wide and sustained public and institutional deliberation. These fourteen banks controlled over 70% of the country’s deposits, and with further nationalization of six private banks in 1980, the possibility for the growth of private banks was erased and the government became the primary repository of financial deposits. This move allowed the state to dictate and control financial transactions and determine the availability of credit across the country. The functioning of these banks came under immense scrutiny for not meeting the demands of the banking sector.

My name is Mr. Devender Singh Wadhwa. I was born in Dehradun in 1951.

My father was earlier in modern day Pakistan. Later, he shifted to Dehradun. Over there he started his own business in food grains and timber. He was basically a wholesale businessman. First, he had a timber factory. Then he shifted to foodgrains like wheat, gur, jaggery, rice, as Dehradun was a hilly area and there was a high demand for such products. My first posting was in Firozpur in 1971 in a bank. My career took off from there.

I worked in a bank for around 40 years. I remember when I began working in the bank; there was a lot of management pressure on us. In 1971, there were very few large banks such as the State Bank of India or Punjab National Bank. Our bank was at that time considered to be one of the smaller banks. In my first year there was a training period of one year where we were kept on probation. There was a lot of pressure on us in that period. We were called to work at 8 in the morning and left at 1 at night. But since we were also very young, we had the strength to work for a long time. The problem was that after banks got nationalized in 1969, a lot of unions started being made in banks. This created a conflict between these unions and the management as both of them did conflicting work in the same organization. And because of this, it was the businessmen and the common person who used to suffer the most. At that time, there were restrictions on banks on who to finance, who not to give loans to. Money was only given to those who were already rich. I saw personally in Firozpur that when small farmers or shopkeepers used to come to the bank, the bank was only interested in receiving deposits from these people. But when it came to finance, they were very reluctant to loan because of things like security, they were concerned about how the loan will be repaid. So this caused a lot of problem to people. Later on when the government intervened, they realized that some of the benefits should go to the small people as well. After that, due to government pressure the banks started loaning out more. And naturally, when banks loan more, industries will grow and even the bank will make profits. More people will get employed.

I remember in 1972-73 working in a bank was considered as a white-collar job. People used to feel very proud of it. At that time, everything was very manual. And to complete the work, you had to sit in the bank for long hours. There was also the pressure of the Reserve Bank, Auditors, and Senior Officials. Slowly things started to change, and especially after computers arrived. Because of computers, the pressure on an employee decreased considerably. Even the customers benefitted due to computerization as costumer services increased. So, this was a big change in the banking sector. Then government policies also came in for the poor, for the farmers. Banks were also told to pay at least 40% advance in the agriculture sector. For people belonging to the lower strata of society, there was a differential rate of interest scheme to pay them Rs. 5000 in loan so their businesses don’t stop. Because of this, people employed in agriculture got a big boost. Slowly, competition also started developing between banks. Earlier people used to go to banks, now banks are coming to people. Even in the corporate sector banks started getting involved a lot. Banks also started receiving money from different sources like the public and the corporate firms, instead of having to rely on the government. So capital started coming into banks which enabled banks to expand their business. When I joined there were around 71-72 branches. Today there are 1400 branches of my bank alone. They started expanding to the rural areas as well. And today, there is mobile banking, internet banking. People are taking advantage of the various schemes of the banks, as well as the government. So there are a lot of changes. Initially, people didn’t have these options. Now the government is going from village to village and trying to ensure everyone gets finance.

There were a few challenges as well. The first challenge was the infrastructure in big banks compared to small banks. The infrastructure we had was much less compared to big banks. The big banks only used to lend to the rich businessman and affluent people. The smaller banks had to put it in a lot of effort to attract customers. So, the challenge for the smaller banks was to grow their business. Now to grow the business, you have to attract people. But the public did not have a lot of faith in banks because they were small banks. They feared that the bank might go bankrupt. Back then, brand image was a very integral part of business. Today, even smaller banks are making a good profit and are providing good services to customers. If a bank wanted to open up a new branch, we had to lobby the RBI, the Ministry of Finance and other departments. It took years to open a new branch and complete all the formalities. Today, that system is completely over. A bank can decide to open up a new branch wherever it deems fit. At that time, the government and the big industrialists only favored the big banks. So for a small bank to establish itself, it had to undertake a lot of effort. We used to work day and night to deliver services to our customers. Yes, we did get a reward for it, but the challenges were immense.

The main thing about the reforms was that it helped to reduce the control of the government on industries. Because of this industries could work more freely, businessmen could work more freely. “Inspector Raj” has been reduced and the various government schemes actually begin to benefit the people. The high rates of interest have been slashed. Earlier, banks were very concerned about the securities a person was offering. They used to check its worth, and see if a person was experienced enough or not. All of these things have reduced now. Now, the people who were rejected earlier are receiving boosts from banks. Day by day, employment is increasing everywhere: be it in agriculture, export-import industry. The automobile industry, software industry have benefitted a lot. There have been a lot of changes in agriculture. The restrictions put on these industries have been cut to a large extent. Earlier they did not have finance sources but now they’re easily available. So, they’ve received a big boost.

Reforms have definitely benefitted the people. Especially in increasing employment, the ease of doing business. Now it is possible to easily open up industries in villages. When that happens, the people of the village get employed. Take the example of sugar mills. The farmer will grow sugarcane, it will then go to the factories, it will be processed and then it will go to the retailers and wholesalers who will sell them in the market. It’s like a chain effect. Everyone is benefitted. Even the standard of living has improved. Wages were earlier very less, they have slowly increased. Purchasing Power has increased. 20-30 years ago we couldn’t imagine that the children of today will be easily able to get car loans, house loans. So where has all of this come from? The 1991 reforms. But in some places, I feel that government regulation might be necessary. Like in defense, or essential commodities. So some regulation is fine. But only some. Sometimes people say that the prices have suddenly gone up. On one hand, you have the farmers who are forced to sell their produce for 50p/kilo. And then in the market it is sold at Rs. 30/kilo. And in between this, you have the middle man. So, the middleman needs to be eliminated. The government has to work a lot more at every level. Village level, City level, even in the metros. There is a lot more work to be done. The amount of work that should be done, is not being done. They make a lot of polices, but they’re never implemented. The reason is the middlemen in between, which creates corruption in the system. The level which we feel we have been lifted to, is not really the case. The problem is that even now the problems of the middle class people are only included in policies and speeches. In all of this, no one really does the groundwork which is required. So policies don’t really have any effect. Till the time the groundwork is not done, not much will change. Even today, if you go to the income tax office, sales tax office, work is not done quickly. There has to be more transparency in the system for the public to feel the government is doing work. At the same time, people also have to think about what they can do for the country. Till people actually think of this, things will not change much. I feel that people still don’t have the value of working together for the country.

The story was collected by IndiaBefore91 fellow Praneet Jaswani, and edited by Simran Uppal, Intern for IndiaBefore91.

Devender Singh Wadhwa
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