March marks the end of a financial year. For employees of listed banks, this is a tough month since both the regulator and the investors keep a hawk’s eye on their balance sheets — how loan assets have grown and, in the current context, how the deposit portfolio has behaved. Of course, profits, asset quality, and other business parameters including net interest margin and fee income among others are also under scrutiny.
March is also important for bankers for another reason — promotions.
Typically, promotion interviews take place in mid-March, and by the end of the month, the results are out. I am referring to public sector bankers.
Under normal circumstances, a panel of four — the bank’s managing director, a Reserve Bank of India nominee, a government nominee on the bank’s board, and an external expert — grills the candidate.
Employees of a large public sector bank have recently raised concerns over transparency and fairness in the promotion process of assistant general managers to deputy general managers after certain officials were elevated despite serious allegations of underperformance, reported a news portal dedicated to banking issues. An RTI filing by an officer has revealed cracks in the integrity of the promotion process.
This raises questions about the standards followed and the decision-making process for the promotion. Some of the officials who have been promoted are facing legal cases, have reputational issues, or a history of poor performance, the news portal reports. Yet, they have advanced within the bank’s leadership.
Let me narrate the story of a general manager appearing for the position of chief general manager (CGM) in another large public sector bank.
Until recently, only the State Bank of India had this position, but now all public sector banks have CGMs. Their number depends on the size of the bank. Typically, it is proportional to the size in the business mix (deposits plus loans) – one CGM for a trillion rupees of business.
This gentleman – let’s call him Mr X – was promoted as general manager when he was 54. In March 2022, he was appointed chairman of a regional rural bank (RRB) in northern India. It was a fairly large RRB with close to Rs 37,000 crore in assets. The total business was to the tune of Rs 60,000 crore. The RRB had 1,400 branches, 22 regional offices, and at least 20 million customers. He was made chairman of the RRB because he was good at his work and had an unblemished career. The cut-off age for the job was 55.
Not many general managers were eligible for the role. Even those who are generally don’t get excited about an RRB assignment.
Mr X diligently obeyed the higher authority’s orders, and took up the assignment. He relocated with his family to a city in north India. His teenage daughter, a Class IX student of a Mumbai school, took admission in a local school. This was her sixth school in nine years.
That year, the RRB made a Rs 67 crore net profit, up 21 per cent from the previous year. Its deposits grew around 8 per cent, and the loan book 10 per cent. The net bad loans dropped from 7.53 per cent to 6.07 per cent.
So far, so good. But during his one-year stint, something happened for which the general manager is still paying the price. He has been overlooked for promotion yet again. Why? For making an 8.45-minute video at the cost of around Rs 6.75 lakh. After including 18 per cent goods and services tax (GST), the video cost the bank close to Rs 8 lakh.
Here’s what happened: The National Bank for Agriculture and Rural Development (Nabard), the RRBs’ regulator, wanted to showcase “Digital Innovations for Advancing Financial Inclusion” through a video, which would be shown at the first meeting of the Global Partnership for Financial Inclusion of the G20 in Kolkata in January 2023. This video was to be played before international delegates attending the G20 summit exhibition, highlighting the achievements of Azadi Ka Amrit Mahotsav and the progress of women in rural India.
Why did Nabard choose this particular RRB for the assignment?
Months before the video was shot, Mr X had presented a paper that impressed everyone at a Pune conclave in September 2022, which all RRB chiefs, the top management of sponsoring banks, and finance ministry officials attended. In October, at the finance ministry’s directive, premier bankers’ body Indian Banks’ Association set up a committee to draft a five-year viability plan for RRBs. Mr X was chosen as one of the five members of the committee. In December, for yet another committee focused on strengthening the IT platform of RRBs, Mr X was picked up as a member.
The RRB received an email from Nabard in the third week of December 2022, requesting for the video, which would be screened on January 9-11, 2023, at the Biswa Bangla Convention Centre in Kolkata during the G20 meet. The video needed to be ready by January 1, 2023. There wasn’t enough time, and the video had to be approved by Nabard and the finance ministry’s Department of Financial Services before screening.
The RRB selected a Mumbai-based agency, after checking with three such agencies, for the job. The agency initially quoted a higher price, but the RRB bargained and brought it down. Both Nabard and the finance ministry loved the film. It was shown at the G20 meet without any editing. Nabard also sent a letter of appreciation to Mr X for doing a good job in such a short time.
It didn’t end there.
A vigilance inquiry followed: Why didn’t Mr X follow the tender norms of a public sector bank? Why did he choose a Mumbai-based agency for the film? Couldn’t a local agency have done the job? Why did the RRB have to spend so much money on the film?
Ideally, the RRB should have floated a tender, waited for 21 days, and gone with the lowest bidder.
The argument that there was no time for that as the film had to be made within 10 days did not hold water. The justification that Rs 6.75 lakh wasn’t that high a sum for a high-quality video shot at multiple locations in the remote villages of northern India also fell on deaf ears.
The findings of the vigilance probe? While the cost of the film wasn’t too high, the quality was good, and there might not have been enough time to follow the tender process, why didn’t the RRB chairman keep the board informed about this? Despite the absence of a guideline requiring the matter to be reported to the board, the vigilance department refused to close the chapter.
The complaint was lodged in January 2023. The case is still open.
This is why Mr X, a general manager, a performer who has been handling his current portfolio in the bank with aplomb, could not get his next promotion. He did well at the interview, but could not make it in the absence of vigilance clearance.
The moral of the story?
Follow the rule book, don’t take any initiative, don’t try to be innovative. With such vigilance shackles, will public sector banks ever be able to compete with private sector banks?
The author, a Consulting Editor of Business Standard, is a Senior Advisor, Jana Small Finance Bank.
This column first appeared in Business Standard
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