Navjot Sidhu is a man of many apt words (now less heard though) and he once described Indian team’s predicament on a bad day in the field as ‘ .. lying flat on it’s back and the only way it can look is – upwards !’ With all the battering that the PSU banks are being subjected to, it could well their story but unlike our cricket’s fortunes there’s no ‘VIRAT’ standing up for them.

To make matters worse are certain opinions in the media on the nuances of banking from such sections that has never seen the inside of a modern PSU bank. The image of PSU banks, alarmingly in the last two years has suddenly transformed from ‘people’s friends’ to ‘social parasites’ and Govt’s bogey, with their staggering bad debts, massive doses of capital  infusion required and the recent spate of banking-related scams, thus making them synonymous with big frauds, malfeasance and poor corporate governance.

For instance a famous pulp fiction writer had articulated in a leading paper ‘..it really isn’t hard to hatch a plan… can imagine the wild party in progress inside those dusty PSB branches’. As much as it’s lurid sensationalism from the author, for justifiably outraged stakeholders it might appear factual, given the magnitude of frauds coming to the fore.

It is as if overnight the PSU banks (which have been beasts of burden for populist govt. schemes for years on and have always paid the price  for it) have become ‘bad boys’ of the financial world and most of them barring the gargantuan SBI, need to bunched or merged together to stem the rot ! The alternative to safe and sound banking being projected are the ‘blue eyed’ private sector banks looking lean (less NPAs) and good (making profits). This impression was working well till the largest private bank and it’s redoubtable Chief were rocked by conflict of interest allegations that have set in motion many actions and have raised concerns of corporate governance in private banks.

In its efforts to portray a strong intent to come down heavily on wrong doers in terms of suspected cases of large bank loan frauds detected in PSU banks, the prime investigative agencies have started summarily arresting and taking into custody, the Heads and Top Management teams (previous and existing  in cases) and widely publicizing these actions in the media, even without really establishing their direct involvement, connivance and any malafide intentions, provoking strong protests from the IBA and PSU bank unions.

For people who spent better part of their existence having served with diligent integrity and more importantly, the large community of literally a million employees committed to their long working hours in some 21 PSU banks, what is the morale like and who’s addressing it ? Apart from a early rebuttal from the MD of SBI group on the ‘private good vs public bad’ issue of banks and a few stray voices from the wilderness of retired groups of officers, there seems to be not much coming out from the promoter/owners and the management to dispel the gloom spread all around and meet the challenge fairly and squarely highlighting stringent action where necessary.

Major battles have been fought by PSU banks from many fronts in it’s long history. It’s well-known internal weaknesses of low margins and strengths of reach and spread and myriad external factors must be addressed by the Govt. and regulators.The bigger war against NPA and credit related frauds has to be fought by a determined and dedicated army led with ‘Churchill’ like tenacity by its owners and leaders and regulators much as depicted in the Oscar winning film ‘The Darkest Hour’ !

( pic source : danscartoons.com )

Till some time back it was the sacred religion of all bankers (and more particularly the PSU banks of all sizes ) to memorize and practice three magic watchwords– the operating bottom-line (meaning bank’s margins and profitability), recovery of funds lent ( of NPAs) and CASA – the popular acronym for Current and Savings Bank (SB) accounts.

Of these, like the traditional values cherished by our Indian sensibilities, Savings Deposits ( the major part of CASA) had all the virtues you could aspire for – less costly, stable, spread among all sections/ages of people and free from undue risks. No wonder, all banks ended up vying for a piece of the Savings cake by offering hybrid-products, linking it to fixed deposits (by ‘sweep’ the excess amount method), freebees for those maintaining special type of accounts with higher balance. While after the deregulation of Savings interest rate by RBI in 2011, many private banks started offering higher rates, PSU banks stoically continued at 4% rate.

However, suddenly, SB, the dependable veteran is not much sought after akin to the discarded parents in family drama ‘Baghbaan’. The biggest Bank felt that too much Savings has come in and it no longer needs to attract depositors with the same force. This has led to an all round free fall of SB deposit rates to as low as 3.5%. The justification, available on hand is – this will lead to higher margins and lower loan rates all across.

Who are the people who keep their money in Savings deposits (and FDs) – a widely dispersed class such as retired people, daily wage labourers, shopkeepers, vendors, average salaried small savers and also non-profit organizations like schools. The convenience and security of possessing debit cards, passbooks, cheque-books of banks overrides such people’s concern for earning high interest but squeezing this to 3.5% is to even wipe any real interest accounting for 4% inflation. It is accepted that for most, the returns on fixed and SB deposit are the social security for real.

‘ The time has come..’(to quote the Walrus from ‘Alice in Wonderland’ ) to look at other avenues of investment like mutual funds and the large number of schemes on offer. But is the average person educated in the risks and rewards of these investments vis-à-vis Savings accounts and laudable objectives of financial inclusion ?!

(Pic source : citysavings.com.ph )