The Case for Women Empowerment

We celebrated International Women’s Day a few weeks ago. The newspapers were full of articles on women’s empowerment. It set me thinking on the myriad ways that women’s empowerment works in building a better, a more peaceful, and equitable society. I have collated some excerpts from various writers and researchers on this subject. Here it goes.

Jeffrey Sachs presents evidence in his book, The End of Poverty, that, in Iran following the 1976 Islamic revolution, the Total Fertility Rate (TFR) fell from 6.7 in 1980 to just 2.6 by 2000 (ie in 20 years). The Iranian revolution, it seems, brought a generation of young girls into the schools, and this boom in girls’ literacy translated rapidly and dramatically into the desire for fewer children. (it was 2.1 by 2022, ie, just about the population replacement rate). 

Similarly, he presents the case of Bangladesh, where TFR fell from 6.6 in 1975 to just 3.1 in 2000 (currently it is 2.0, ie below replacement rate). Rapid and substantial improvement in female literacy rates is considered the main proximate factor for this demographic transition.

Jean Dreze & Amartya Sen in their book, India: Development & Participation, describe a similar phenomenon in India. They contend that, "Speedy fertility declines in the states of Kerala, Tamil Nadu, or Himachal Pradesh can be firmly linked to the rapid enhancement of female education and other sources of empowerment of young women."

They go on to describe how women empowerment, especially through literacy leads to a better and less dysfunctional society. In their words, "… it is useful to look at those parts of India which have relatively high literacy rates, and other social features that are associated with voluntary reduction in fertility rates. Kerala does provide an interesting comparison with China. Kerala’s fertility rate of 1.8 is just below China’s 1.9, and this has been achieved without any compulsion by the state. Kerala has higher literacy rates than China and in fact, the female literacy rate is higher in Kerala than in every province of China. Kerala’s success in reducing the birth rate disputes the necessity of coercion for cutting down fertility. Moreover, since this low fertility has been achieved voluntarily, there is no sign of the adverse effects that are noted in the case of China, eg, heightened female infant mortality and widespread abortion of female foetuses."

Education is only one means of empowering women. It is (correctly) argued in The Economics of Microfinance, that in the traditional neoclassical economic approach to household decision making, there is no room for analyzing conflict between men and women in the family. Households are seen as acting as a single unit, making choices as if household members were in full consensus. This approach suggests that it is optimal for men to benefit from their comparative advantage by specializing in strength-intensive marketable activities outside the house. Women, on the other hand, should devote more time to unpaid household work and those marketable activities that require considerably less physical strength, even if the monetary rewards are often low due to market discrimination. It remained unclear whether such unequal specialization within the household truly reflects women’s preferences.

Rather than assuming that households work by consensus, economists have recently started deconstructing household choices, finding them to be driven often by inequalities, bargaining, and conflict. They have thereafter derived implications of a model in which bargaining power is driven by the ability of women to credibly threaten to leave the household. The credibility of those threats will depend on factors like earning power and other factors that affect women’s relative power within the household, such as divorce or employment legislation, and of course education.

This line of thought on the societal benefits of empowering women, finds an echo in Raghuram Rajan and Rohit Lamba in their recently released book, Breaking the Mould. They present the case that “Paid employment increases a woman’s bargaining power at home, leading to greater gender equality, including a greater role in household decision-making and greater ownership of household assets.” They also refer to a recent IMF study, which brings an interesting aspect to the role of working women in society. The study contends that, men and women are not simply substitutable labour. Men and women increase each other’s productivity by bringing different sets of skills and perspectives to the workplace.

Dedicated to all the gutsy and glorious women in my life. 

On Pollution by Light

Whenever we think or voice our concerns on pollution, rarely do we mean pollution caused by light. But the hard fact is that light pollution is pervasive and adversely affects not only human beings but all living organisms which in turn effects the larger environment.

Light pollution rarely, if ever, raises the same level of concern as air, water, or noise pollution and is generally mistakenly perceived to be harmless. A direct result is that there are few guidelines or safety standards in place in many parts of the world on what constitutes “light” pollution.

Listing the myriad ways in which light pollution affects us and our environment is interesting and quite an eye-opener of its myriad adverse consequences.

It is said that charity begins at home, so let us first try and appreciate how excessive amounts of light affects human health. First and foremost, it can cause retinal damage and it disrupts sleep patterns. Disrupted sleep patterns in turn has various psychological and physiological effects, such as, continuous feelings of tiredness, confusion, excessive anger, disturbed inter-personal relationships, headache, indigestion etc. That is one reason physicians advise that one should always sleep in a darkened room.

Moving out of our homes, we are confronted by bright lights emanating from street lights, advertising and decorative lights, oncoming headlights of vehicles, flood-lights illuminating places of tourist, commercial, or historical interest etc.

I am sure all of us have encountered being blinded by the headlights of oncoming vehicles. This is extremely disconcerting, especially for the driver, and major contributor to road accidents. It also contributes to road kills of wild animals on highways.

If for nothing other than enlightened self-interest, we should show some responsibility towards other life forms. It is well known and understood that human beings are critically depended on their well-being and survival on their natural surroundings. Unnecessary artificial illumination poses a threat to our natural environment by disrupting the natural life cycle of insects, animals and birds. Trees provide shelter to various kinds of animals, birds, and insects all of whom need the night cycle as much as they need the sun.  Excessive street light confuses and changes their behaviour patterns.

Bright lights disrupt animal navigation at night and is a significant threat to migratory birds. Birds are often unable to migrate when confronted with light pollution, because they get disoriented, fall prey to predators and travel the wrong way, among other things. This should worry us, because India offers important pathways for migrating birds. It also induces changes in their natural behaviour patterns and is confusing for night pollinators.

At the 13th Convention on Migratory Species in Ahmedabad, in 2020, it was recognised that “artificial light is an emerging issue for the conservation of wildlife, astronomy and human health and it adversely affects many species and ecological communities by disrupting critical behaviours in wildlife, stalling the recovery of threatened species and interfering with a migratory species’ ability to undertake long distance migrations integral to its life cycle”.

With various state governments deciding to facilitate nightlife in our cities and towns in their pursuit of “development”, there has been a steady increase in the use of artificial lighting which is an additional source of light pollution.

At present, there are no international or national guidelines to curtail light pollution. Doctors said the amount of light the human eye can adjust to and finds useful is between 400 and 500 microns. However, the current LED lights or those installed on advertising hoardings and even some street lights are well beyond 500 microns.

Researchers say that the growing transition from high-pressure orange sodium lamps to energy-efficient and cost-saving white Light Emitting Diodes (LED) for street lights has become counter-productive since governments are installing more LEDs which in turn are making the skies significantly brighter.

While everybody would agree that some amount of artificial lighting is essential to ensure the safety of citizens, the question arises as to how much is excessive lighting. Moreover, from a climate change perspective too, excessive use of artificial lighting is not only a waste of energy, but also contributes to global warming.

The big question is therefore how could we contribute to the serenity of our beloved County by reducing light pollution within our campus.

Written largely based on inputs by my dear friend Vijayvardhan Reddy, to whom I am eternally grateful for introducing me to this very important subject.

A Tribute to my Teachers

Today is 5^th of September (2023), the day India celebrates Teacher’s Day as a tribute to Dr. Sarvapalli Radhakrishnan, independent India’s first Vice President and later second President. He was essentially a noted academician and philosopher, and had held distinguished positions in the Universities of Mysore, Calcutta, and Oxford. He had also served as the Vice Chancellor of the Banaras Hindu University (1939-48).

As a story goes, after he became the President of India in 1962, a few of his students requested him to allow them to celebrate his birthday. However, Dr. Radhakrishnan asked them to observe it as Teacher’s Day instead. Since then, September 5 has been celebrated as Teacher’s Day.

On this day, the general trend is to meet, felicitate and honour one’s school or college teachers throughout the country. But life is life and it has many teachers - they come in all shapes, sizes, and temperaments. Today I plan to remember and honour some of my life’s teachers.

The first person who comes to my mind is the lift-man in a high-rise residential building in which I then lived – a short, quiet, diminutive man with a shy smile. It so happened, that while travelling in the lift, one of my fellow passengers casually mentioned as to why do we need a lift-man in a fully automatic lift. Prima facie, a most logical question. But I noticed that the lift-man cringed on hearing this and in his soft spoken manner replied in chaste Hindi – “it gives employment to one man”. Later I came to know that the person had an MA in Sociology and had come to Hyderabad (from a small place near Varanasi) in search of employment and with much difficulty the only work he had been able to find was that of a lift-man. He worked 12 hour shifts and lived in a room which he shared with five other men in similar circumstances. I soon moved away from that city, but the lesson I got from that one sentence remains with me.

The second teacher who comes to my mind is a truck-driver I befriended while I was doing my rural assignment in the back-of-beyond small village in Bihar. Against normal practice of most bankers in similar predicament, I had decided to live in that village rather than commute from the nearest town (see A Rural Sojourn). I got acquainted with this man at the small eatery in the village which we both frequented. He was about 40 years old, dark, short, wiry, used to have a permanent salt and pepper stubble on his face, and invariably wore just a lungi with a singlet. He used to drive someone’s ramshackle truck on some kind of commission basis and just about managed to keep his body and soul together. It is more than 35 years and I do not remember his name but his image remains crystal clear in my mind’s eye.

One day, this man very hesitatingly approached me with a request to help him open a bank account. Thirty-five years ago, having a simple savings bank account used to be a prestigious affair which also involved battling a major exercise in bureaucracy. This man’s main worry was that he did not have a “guarantor”. The local practice was that the introducer was referred to as a guarantor and few people wanted to take the responsibility of that risk. However, since I had become fairly well acquainted to this man, I readily signed the account opening forms as introducer and arranged for opening his account the next day.  He used to regularly drop into the branch to deposit small amounts and we would greet each other. Around six months after the account was opened later, he came to get his pass-book updated which then came to me for initialling. I was surprised to note that he had a balance of around Rs.10,000/- in his account! While handing his pass-book to him I joked, hey you are a rich man. After nearly three years of service I had never had so much money in my SB account. The man looked at me with folded hands with a look of utter gratitude in his eyes and replied, “Huzoor, if someone had opened this account for me ten years ago, the truck that I drive would have been mine”. This was my first lesson on the importance of promoting savings habits for equitable economic development of a society, and the role that financial intermediaries can play in it. It was later that I read and started understanding the various implications of this seemingly simple intervention. I have written about it in my blog “On Financial Inclusion”, and the article, “Savings - Banking Industry’s Step Child”, published by Money Life. I also have some lovely memories of my trip to Siliguri (see, Kursela Days 11 – A Trip to Siliguri) with this man on his truck!

Having studied in seven schools and three colleges, I have had innumerable formal teachers but only a couple of them have left any kind of lasting impression on me. One was Sister St. Pius – a Keralite nun and Principal of the small school from where I did my 9^th and 10^th years of school. I was in the incorrigible habit of getting into all kinds of scraps and being sent to the Principal’s office for punishment – at all the schools I went to. This kind of affair was ordinary and boring until I got to meet Sister St. Pius. She did not scold me but got me to first tell her my side of the story. This was a major shock to me, as I had never encountered anything like this before. After I had mumbled my side of the story, she kept quiet for a few moments and then softly asked, “Why do you think you are justified in doing what you did?” I had no reply to give. She then asked me to think about it and let me go. Forty-five years later, I am still thinking.

At the university, in course of my final graduation exam, I chose to answer a problem which involved deriving a fairly complex mathematical solution. This was in a paper in mathematical statistics. I was able to think out the solution and derived the answer using first principles. But as luck would have it, I had made one silly mistake because of which the answer was wrong. It so happened that the professor who had taught this course passed by on invigilation duty, peeked into my answer sheet and casually mentioned, “revise your derivation”, and then walked away. This man was an absolutely no-nonsense person, a stickler for discipline, and generally a very unfriendly person. I realised that I must have made some mistake in the derivation and slowly rechecked all the steps and figured out where I had made the mistake, which I then rectified. I can never forget this teacher.

Starting work brought another cohort of exciting teachers – bosses, customers, and colleagues. I have been extremely lucky to have the opportunity of working under a series of great bosses – gentle, calm, but politically adept - who mentored me to who I am today. There were also a couple of sadists – but one gets to learn some great lessons from them too!

I would like to share one good and one bad memory here – though in retrospect both were essentially educative.

I had a boss who was notorious for refusing leave. As luck would have, I had to attend to a pressing family affair and desperately needed three days leave. It was with great trepidation that I entered my boss’s chamber but before I could utter a single word, he barked without even looking up, “I can’t give you any leave”. I was more than perplexed as to how could he be aware that I had come to request for leave, and what was I to do now. The background was that my sister’s father-in-law had expired and I had to go to the funeral to represent my side of the family. It was a social need which I could not avoid. I finally screwed up some courage and blurted out as to why I needed the leave. He thought about it and immediately agreed to give me the three day leave (but not a day more), with the remark, “If you do not go, your sister would have to hear taunts all her life that no one from your family came for the funeral”. Later on in my professional career, I have always tried to understand my subordinate’s leave requirements and hardly ever had occasion to refuse one.

The second incident relates to my interaction with our Law Officer. There was a large loan proposed to a PSU which was backed with a Government of India guarantee and we were feeling quite smug about bagging this “safe” business. I had gone to meet the Law Officer to get the guarantee formally vetted by him.  He was a competent and genial person (a rare combination), and after he had done the vetting he cheerfully remarked, “if the loan goes bad, would the Bank have the guts to prosecute the President of India”. He said it in Hindi using very colourful language – “Kya iss guarantee ke bal pe aap President of India ke kamar mein rassi bandhwa payenge” (which translates to, “On the strength of this guarantee would you be able to tie up the President of India in ropes as a prisoner). At that point of time, I took it as a joke and laughed it off.

It was only over time that I realised that the best or rather the only viable security in any lending operation is a borrower who can utilise the funds and generate a positive return, along with ability of the lender to entrap the cash flows. All other kinds of security are not just secondary, but rather tertiary. Banks being highly leveraged entities, working on thin operating margins, have a low margin of safety. Depending on foreclosure of security as primary security for collecting its dues would push up transactions costs to the extent of making the business unviable. This was one mighty valuable lesson.

Customers can also be great teachers, and in fact the bad ones teach you more about banking and the politics which goes and can go in it, than the good ones.

One such memorable learning experience relates to the branch where I did my rural assignment. The branch had a tractor loan which had gone bad. In fact, the borrower had filed a counter case against the tractor dealer and the Bank for cheating him and selling him a second-hand tractor for the price of a new one! The logic being that when the tractor was purchased by him it showed an odometer reading of some 15 kms. Though lending operations were not under my purview, I sort of bull-dozed the Branch Manager and the Field Officer into letting me meet this borrower so as to try and recover the amount. POs in Patna Circle were held in pretty high esteem and my BM rarely, if ever, refused any of my suggestions (he was uncomfortable with most of them).

I took the Bank’s jeep and drove off to meet this borrower. The borrower was a fairly well-to-do farmer, and sarpanch of his village (Jhagduchak Panchayat in Katihar District). As soon as I reached this person’s house and introduced myself, I was greeted very warmly and with the deference due to some kind of high official (I would not have been more than 26-27 years old). After I had explained the reason of my visit, the borrower feigned as if I (and the Bank) were doing him a major injustice and insulting him. His primary take was how could the Bank even imagine that such an honourable person as him could default on his commitments. In his opinion, the Bank should worry on giving loans (under IRDP and other government sponsored schemes) to poor and marginal farmers who take loans and then disappear since they have no land to tether them. There was no way that he with his vast land holdings could disappear. Moreover, he was a just, respected, and honourable person and the sarpanch of his village. Then he went on into a tangent and started discussing all kinds of things. Every time I tried to bring up the subject of his repaying his loan his standard response was that the Bank should rest assured that he would honour all his commitments before going off on another tangent. I made at least two more visits and the same drama was repeated. Later while talking to other people in the area, I came to understand that this person was notoriously slippery in all his dealings. But the lesson, that one should know the borrower well before taking any kind of credit exposure, remains.

With warm and respectful salutation to all my teachers.

 

Adventures in Banking (To be read as Reminiscence of an Old Man) - I

“N” was a large well-known profitable company with sound financials whose main business was production and marketing of chemicals and fertilisers. Naturally it attracted corporate bankers the way honey attracts flies.

"N" had a borrowing arrangement through a consortium for its working capital requirements and with all India DFIs for term debt. In addition, it had borrowed (rather it was lent) clean “corporate loans” with no clear end-use from a number of banks trying to edge into its regular working consortium or generally start a relationship. These loans were largely structured by way of periodical payment of interest with bullet repayment of principal. In view of the size of operations of the company or exposure, each of these corporate loans was of relatively small size and could be easily repaid out of its cash flows – provided there was no bunching of repayments.

In this way the company had raised about Rs.100 crores and had invested it in an unrelated diversification project which had some major teething problems and the expected cash generation did not happen. This in turn resulted in severe liquidity strain for the company. So much so that the WC consortium leader was monitoring each and every payment with the condition that only payments for regular operations were permitted.

Given the size of their operations and stability of cash flows servicing of these loans had not been considered a major risk factor by the lending banks. I had just joined a new assignment and the branch had one such Rs.20 crores corporate loan exposure. Interest was being serviced regularly but at the time of bullet principal repayment the company requested and was given time for 30 days to repay the amount. The 30 days turned to 60 and then to 90, but the principal repayment did not materialize. Interest payment also started getting delayed and then stopped. In effect the exposure became an NPA.

Given the size and prestige of the company, taking legal recourse was temporarily deffered. However, regular visits were made to meet and request the top managers for repayment of the loan. In this course I met the CEO who directed me to the Director Finance. We had a couple of very cordial meetings where the DF explained the liquidity problems being faced by them and assured me it was a temporary issue and thereafter small amounts dribbled in which just about covered the accrued unpaid interest. The proof of the pudding is in eating it, and there was no further repayments.

Then the DF started avoiding meeting me and I ended up sitting long hours in his ante-chamber trying to meet him without any actual meeting. This was upsetting my other work schedules and therefore I decided to try and meet him in the evening after finishing my day’s work. This tactic was also unsuccessful and I could not get to meet him even though I sat quite late in the evening in this company’s office over several days.

Meanwhile pressure on me to get the account regularized had become very intense.

Now this company had a culture / practice of serving tea with a heavy snack for all employees and visitors sitting in office after 7 pm. The first day I also partook of the tea and snacks, but later felt uncomfortable of having taken it. From the next day, I politely refused it under some pretext or other. After a few days, the DF’s secretary came and requested me to take the tea and snacks. I thanked him and very politely told him that I have been coming to meet the DF and not eat. He went and informed this to the DF, who came out of his cabin and escorted me to his cabin. He then told me that my refusing the snack was embarrassing for him. I just reiterated my request for repayment of our loan and took my leave.

The next day we got a cheque for the full principal dues paid out of an account which the WC consortium leader was not aware of! We appropriated it and advised them the remaining interest dues (a very nominal amount). Within a couple of days that payment was also received.

Lesson 101 – There is more to loan documents, security, financial analysis, legal recourse, registration of charges etc etc for effecting recovery in NPA accounts.

IndAS and Indian Banks

 

Ind-AS refers to Indian Accounting Standards and they have been formulated keeping the Indian economic & legal environment with a view to converge accounting standards in India with International Financial Reporting Standards (IFRS).

The RBI had issued a circular in February 2016 requiring Scheduled Commercial Banks (SCB) to implement Indian Accounting Standards (Ind-AS) in order to bring Indian accounting standards in line with international standards, and prepare standalone and consolidated Ind-AS financial statements with effect from 1 April, 2018. However, in April 2018 RBI deferred the applicability of Ind AS by one year, i.e., implementation was to be effective from 1 April, 2019. Later, RBI issued a circular in March 2019 which deferred the implementation of Ind-AS till further notice, giving the reason that implementing Ind-AS would require amendments to be made by the government to the relevant banking laws. The legislative amendments recommended by the RBI are still under consideration by the Government of India.

Financial institutions like banks, preparing their financial statements under Ind-AS norms would, inter alia, have had to calculate Expected Credit Losses (ECL) on their loans and advances during each reporting period and make necessary adjustments to their profit-and-loss account even before a borrower had defaulted on a certain loan.

Presently, SCBs are required to make loan loss provisions based on an “incurred loss” approach, which implies that they need to provide for losses that have already occurred / incurred.

Since classification of a loan as NPA normally takes place after a loan becomes overdue, the loan loss provisions are only made thereafter. By this time the borrower may have started facing financial difficulties which is reflective of increased credit risk faced by the banks which is not captured by existing accounting norms.

Ideally, the bank should have recognized the increase in the credit risk and started making provisions for the losses that would be expected in such exposure much before the default happened let alone the subsequent classification of the exposure as NPA.

The adoption of Ind-AS could, therefore, cause banks to proactively recognise losses on their loans and build up the necessary underlying provisions. This would lead to increase the reported level of NPAs and banks who have more to hide would naturally try to avoid adopting Ind-AS accounting norms for as long as possible.

At the same time, implementing Ind-AS would put further pressure on the Central government to increase the amount of funds required for recapitalisation our PSU banks. This would further exacerbate their already stretched fiscal situation.  

One of the pillars of sound banking regulation is effective use of disclosure as a lever to strengthen market discipline and encourage sound banking practices. That is, more transparent financial disclosures would force banks to be more careful in their banking practices and make for sounder and healthier banks.

In this regard it is interesting to note the ground level reality as reflected in the Annual Reports (for FY 2021-22) of some major banks. For this article a sample consisting of Axis Bank, HDFC Bank, and SBI has been considered.

HDFC Bank reports that it being an associate of HDFC Ltd. submits its consolidated financial information prepared in accordance with the recognition and measurement principles of IndAS to HDFC Ltd for the purposes of its consolidated financial statements / results.

Axis Bank reports that, it is in the process of implementing necessary changes in its IT systems wherever required and other processes in a phased manner and it is also submitting Proforma Ind AS financial statements to RBI on a half-yearly basis.

SBI blandly mentions in its AR that it is already geared up for implementation of Ind-AS. However, implementation of Ind AS in Banks has been deferred by RBI until further notice. No further information is given. Thus implying that its reported financials are not IndAS compliant.

The level of transparency practised by these banks should be apparent from the above.

Is it a wonder that there is such a wide divergence as to how the market perceives these banks as reflected in their stock prices!

This does not bode well for the health of the banking system as banks that do not recognise their problems have much lesser pressure to resolve them.

The pain is likely to continue till GOI puts in place structural reforms for putting the governance of PSU banks on sounder footing.

Bank Nationalisation – A Different Perspective

Most friends find it difficult or even impossible to believe or even consider that nationalisation of banks (in 1969 and 1980) was anything other than an economic masterstroke.

Well, they can't really be blamed. That is what we have been brainwashed with over the last 50 + years. The irony is that no political party, irrespective of persuasion, wants to call out this bluff.  The benefits of having a pliable banking sector under constant leash is too lucrative. 

Most economists, social scientists, or policy makers, who should be aware of the horrendous and prolonged ill-effects of this decision are unwilling to go on record if they have any misgivings. It is human nature that it is extremely difficult to go against the grain. (With the honourable exception of Arvind Subramanium - his view is included in this essay). 

There are at least three conundurams to the issue of bank nationalisation. First, was it essentially a political bluff or an economic game-changer. Second,  has this decision adversely affected our economy and society and how. Third, what can be done to rectify the situation, if it needs rectification.

This is the first part of my series where I give evidence as to why I changed my opinion and am now convinced that the sole reason for nationalisation of banks was purely political for extremely petty and selfish reasons. 

From: Of Counsel by Arvind Subramanian (page 18)

If you were to ask me what the two egregious economic sins we committed in the past were, they are the Industrial Policy Resolution, which started the licensing of industry, and bank nationalisation in 1969.

Extract from Jairam Ramesh’s biography of PN Haksar (Intertwined Lives – P N Haksar & Indira Gandhi), who masterminded the nationalisation of banks announced by Prime Minister Indira Gandhi.

As late as 9 July 1969, [PN] Haksar was not entirely convinced that banks had to be nationalised right away. Then three days later came the assault on Indira Gandhi’s authority with the announcement of Sanjiva Reddy as the Congress’s presidential candidate (12/07/1969). Subsequently, Morarji Desai’s resignation was secured after four days (16/07/1969).

My guess is that between 12 July 1969 and 15 July 1969, Haksar and Indira Gandhi must have confabulated and decided to shed their caution on bank nationalisation. On 16 July 1969, she asked PNH to meet with KN Raj, one of India’s most distinguished economists and find out his views on bank nationalisation.

Another eminent economist, PN Dhar, was also present when PNH and K N Raj met. Dhar was to later write that Raj strongly favoured nationalisation but felt it would take at least six months to carry it out.

But just three days later, on 19 July 1969, 14 banks were indeed nationalised, making one of Indira Gandhi’s “stray thoughts” an immediate reality. This account is from the memoirs of DN Ghosh, who was then the official concerned in the banking division of the Ministry of Finance and who was to later become the chairman of the State Bank of India (SBI). It was the night of 17 July 1969 and Ghosh recalls being summoned to Haksar’s residence:

I saw that Haksar was browsing through a mass of papers, among which I could spot the Reserve Bank publication, Statistical Tables Relating to Banks in India. He was trying to figure out how many banks accounted for 80 per cent to 85 per cent of the total resources of the system. Off the cuff, I said the number could be 10 to 12 banks.

Just then, the Union Minister of State for Company Affairs, KV Raghunatha Reddy, strolled in and stood listening to our discussion. He piped up that it was a golden political opportunity to nationalise all banks and that we should go ahead with the bold decision. Haksar waived his suggestion politely and requested him to keep his impetuous radicalism to himself.

Haksar wanted to be left alone till he himself had been fully briefed on a subject that was entirely foreign to him. I then asked him if the Prime Minister had made up her mind on nationalising the banks. “Not yet”, he replied. “We are to discuss this tomorrow morning.” He was not sure if it would be possible to sort out all the legal conundrums involved and have the ordinance [for nationalisation] ready by 19 July which was a Saturday. The date was crucial for two reasons. [Acting] President VV Giri was due to demit office on the forenoon of 20 July and the Lok Sabha would begin its monsoon session on 21 July.

The choice of Ghosh by Haksar to be the “keeper of secrets” as far as bank nationalisation was concerned reveals much of how PNH operated.

A Bakshi, who was then deputy governor of the RBI, had worked with Haksar in London in the early 1950s. They were ideologically also similar and were exceedingly close personal friends. Thanks to Haksar, Bakshi would join the soon-to-be-created department of banking in the Ministry of Finance and later become the Comptroller and Auditor General (C&AG) of India in 1972. It was Bakshi who had given the seal of approval to Ghosh and had joined the duo late that night of 17 July 1969 for confabulations.

The next day (18^th July 1969), Ghosh writes, the prime minister herself summoned him in the morning. She wanted to be convinced that the legislative draft for nationalisation of banks could actually be prepared in less than 24 hours. When she was told that such a draft had, in fact, existed from the end of 1963 when nationalisation of five banks had first been considered, she appeared to relax and swore Ghosh to absolute secrecy saying that in case of any hitch he should apprise PNH.

For the next few hours, Haksar, Bakshi, Ghosh and a few others who had been specially commandeered for this purpose, like RK Seshadri (an RBI official) and Niren De (attorney general) slogged to prepare the ordinance – which was an executive order that would have to be ratified by Parliament later.

At 8.30 pm on the night of 19 July 1969, Indira Gandhi addressed the nation on radio and announced the nationalisation of banks.

From: India – Government & Politics in a Developing Nation

Robert L Hardgrave Jr, & Stanley A Kochanek

In an effort to build and maintain a progressive image, the Congress party over the years had adopted a series of resolutions promising a fundamental transformation of the Indian economy. These resolutions had acquired an increasingly radical tone as Congress fortunes began to slip at the polls. Calls for nationalisation of private-sector banks, insurance companies, and key industries entered the Congress program.

Demands for redistributive justice became embroiled in Congress factional politics when Indira Gandhi’s power was challenged by her senior and more conservative colleagues in the Cabinet and the party. Mrs Gandhi, on the advise of P N Haksar, decided to counter this challenge by transforming the factional dispute into an ideological crusade. …. The strategy was a resounding political success and resulted in reversing the process of economic liberalization. (Page 361).

From : Barons of Banking – Glimpses of Indian Banking History by Bakhtiyar K Dadabhoy

(Dr. I G) Patel gives us his version of events in his memoirs. Indira Gandhi sent for him and asked him if banking was under his charge. No one else was present. On his telling her it was, she simply said: ‘For political reasons, it has been decided to nationalise the banks. You have to prepare within 24 hours the bill, a note for the Cabinet and a speech for me to make to the nation on the radio tomorrow evening. Can you do it and make sure there is no leak?’ (Page 305)

Dadabhoy has supported this view point by referring to The Evolution of the State Bank of India (Vol 3, Pae 34)

From: Perspectives on Development by Dr. V V Bhatt (GM & CEO IDBI at that time)

By 1969, prominent commercial banks were nationalised by Prime Minister Indira Gandhi, purely for political reasons. L K Jha (RBI Governor) was not in favour of this policy. Neither was I. I wrote an article in the Economic and Political Weekly (October 1970) criticising the move (I have been unable to access this article).

From: Interview of Y V Reddy published on 15/07/2019

https://www.bqprime.com/business/dont-allow-public-sector-banks-to-whither-away-says-yv-reddy

“Banks were nationalised at the whim of a Prime Minister, they will be de-nationalised at the whim of another Prime Minister.” Y V Reddy.

From: Bank Nationalisation: The Original Sin by DN Ghosh

https://www.bqprime.com/opinion/bank-nationalisation-the-original-sin

So, is bank nationalisation the original sin? Alternatively, was it a case of bad economics but good politics? To answer all that, some contextualisation is necessary.

From: Finance at the Frontier by J D von Pischke

Commercial banks were considered by some central bankers, government officials, academicians and by many politicians to be at best indifferent to farmers and at worst unpatriotic corporate citizens. 

This report (Report of the Expert Group on State Enactments Having a Bearing on Commercial Banks Lending to Agriculture – Talwar Committee 1971) dispels the view that prior to their nationalization Indian commercial banks were unwilling to lend in rural areas because of urban bias or lack of interest. (PS: I have been unable to locate this report).

From: Breading the Mould by Raghuram Rajan & Rohit Lamba

A similar approach is needed for momentous policy decisions. … Yet by their very nature, they occur without much consultation, are often based on short-term political calculations, and can have unintended effects, especially in large, complex modern economies. Arguably, the 1969 nationalisation of banks and the 2016 demonetisation both fall in this category. (Page 114)

Both the overnight bank nationalisation in 1969 and the declaration of the Emergency in 1975 were done suddenly and without much consultation. Few would assert they benefited the nation. (Page 252)

Ananthan Gets Shot

It was just another boring day in office.

After completing my rural assignment at Kursela I was posted to the Zonal Office, Purnea, where I was attached to the Development Officer in the DGM’s secretariat. Apart from writing a few letters and collating some statistics, I had very little else to do. Time hung heavily on my hands and we spent our time going down to drink tea at least 4-5 times in a day, discussing office politics day and night, and desperately seeking some excitement.

One morning, as usual, we had reached office by about 10 am and till about 10.30 people were still settling in with their morning cup of tea, when the Personnel Officer walked in. He used to commute daily from Katihar, which was 40 kms away, but invariably used to reach office on time. Therefore, his reaching late was a little unusual.

After reaching office, he immediately called for me. Since I had been awaiting transfer to Patna for quite some time, even though my transfer orders had come but there was no sign of any replacement joining, I had not been relieved. With the happy feeling that my long-awaited replacement had come I sauntered into his chamber trying hard not to let the anticipation of being relieved show on my face.

What awaited me there was quite different and totally unexpected. With a very grave face he informed me that my friend Ananthan had been shot and was presently admitted at the District Hospital in Katihar. He had very little details beyond this, which he had gathered at the Katihar bus-stand while coming to Purnea. After passing on this information, he practically washed his hands of this affair.

Chokalingam Ananthan was a batch junior to me, and posted at some rural branch around Purnea. I was aware that he had accompanied Pawan, another batchmate of his and the two had gone to Patna, which was about 300 kms away, to purchase a motorcycle for Pawan. My mind was in a twirl and for a few moments could not make out what I could or should do. On instinct I went to the branch, withdrew all the money I had (a little less than Rs.1000/-), informed one or two of my colleagues, picked up my mobike and drove down to Katihar.

I reached Katihar District hospital by about 11.30 am where I found a big crowd of people, quite a few of whom were bank staff, both from SBI and other banks, milling around the place and just adding to the confusion. No one seemed to have any details except that some bank official had been shot on the Katihar-Purnea highway that morning and the person was still alive. After some time, I was able to establish contact with the doctor on duty who in a matter-of-fact voice informed that luckily the bullet had missed Ananthan’s heart and spine, and they had been able to stitch up the wound. However, for further medical assistance and follow-up he should be taken to Patna. Ananthan was at that point under deep sedation.

I then chanced upon Pawan in the crowd. Pawan seemed to be in a complete state of shock, with wide open blank eyes complemented with an equally blank look on his face. I took him away from the crowd and tried to piece together what had happened. By this time, my friend and batchmate, Mohit Sinha who was also posted at Katihar had joined us.

Pawan had purchased the bike the previous day in Patna and he and Ananthan had taken the night train to Katihar with the brand-new bike booked in the luggage van. The train journey was quite uneventful and on reaching Katihar early next morning had got the bike released from the railway authorities. Since, Pawan was not sure of his driving skills, Ananthan was driving it with Pawan in pillion as they drove down from Katihar to Purnea. At around 8 am while they were somewhere midway between Katihar and Purnea they encountered a couple of young men who signalled them to stop. The decided to ignore them but had to slow down a little. It was then that one of these young men whipped out a country made pistol and shot at Ananthan. Even though hit, Ananthan kept driving for a little distance before collapsing.

This being Bihar, things took an interesting turn here. Some local villagers who had witnessed the incident immediately came to their rescue. They first caught hold of the assailants. Then they stopped a passenger bus going from Katihar to Purnea, got all the passenger to get down, got the driver to turn the bus around, loaded Ananthan and Pawan on to the bus and brought them to the Katihar District Hospital where Ananthan was admitted. Meanwhile some other villagers took the two assailants and lodged them at the local police station.

The dilemma now was how to take Ananthan to Patna. Though there were crowds of people, including some from the Officer’s Association, no one was willing to involve themselves. Katihar is about 300 kms from Patna by road and there used to be a pot-holed apology of a national highway connecting the two which it took a minimum of 10 hours to cover and could easily stretch to 14 hours. No ambulance or private vehicle was available and carrying Ananthan in that condition by bus was out of question.

The only other alternative was to take a train which left Katihar at about 4 pm and reached Patna by 11 pm and consisted only of second-class sleeper coaches. One of those slow trains meant for ferrying cheap Bihari labour to Punjab. We decided on taking the train as through the good offices of the local Officers Association we were able to get tickets and reservation in sleeper class. Ananthan was coming in and out of drug induced coma and was on oxygen support. In one of his lucid moments, we asked him of how could we inform his folks of this incident. He was clear that his parents should be informed only if he became well or died. They lived somewhere in the interior of Tamil Nadu, knew no Hindi or English, and would have no clue as to how to handle the situation. However, he had a brother who worked somewhere in the armed forces and should be informed.

So, we boarded the train - Ananthan on a stretcher under oxygen support, Mohit, a young lad who was some private doctor’s assistant and knew how to handle the oxygen cylinder, and myself. Thanks to a friendly coach conductor we got decent berths and the train was not too crowded.

As we were approaching Patna, a fresh dilemma struck us. What were we to do after reaching Patna. How to get Ananthan off the train, what hospital to take him to etc. etc. However, luck was with us. LHO had been informed about the incident and the SBI fraternity, both from the Personnel Department and the Association, were in present in full force on Patna station. The Personnel Department was led from the front by the First Officer, Yashi Sinha, himself.

They were aware of the train we were coming on, but had no clue as to in which coach we were in. Yashi had therefore stationed people all along the entire platform. He had also arranged for a doctor, ambulance, cash, police assistance etc. and we were immediately whisked to Patna Medical College Hospital. For the two days Ananthan was admitted there he received virtually no medical attention. Then it was decided to shift him to the private hospital of Dr. Abdul Hai, one of Patna’s leading surgeons where Ananthan was operated and over the next ten days slowly recovered and was back on his feet in about two weeks.

There are some interesting sidelights to the episode. Since Mohit and myself had moved directly from office we had no change of clothes, tooth brushes etc. Since my brother lived in Patna I managed by borrowing his clothes. With the money Mohit was carrying, he managed to purchase a ridiculous looking orange T Shirt and trousers from some pavement shop and lived in it for the next one week.

Once Ananthan’s condition stabilised, Mohit and myself returned to Purnea. The first thing the Personnel Officer asked me was how come I was away from office for some ten odd days without a leave application. Mind you, this is the same guy who did not lift his little finger to help even though he was physically present in Katihar when the incident happened and he was aware of the situation and was fully aware of where and why I had gone!

Every dark cloud has a silver lining. Ananthan had been desperately seeking an Inter Circle Transfer to Madras Circle. He got it on priority soon after he was well enough. And all our other friends who were seeking ICTs from Patna Circle thereafter plotted to seek out someone who would be willing to give them a glancing shot, not life threatening but just enough to get them an ICT. Ananthan got married soon after getting his ICT to a medical doctor.

Pawan did not fare as well. Being the sole witness to the attempt to murder he remained under constant police and societal pressure for a long time. At the same time, he kept on getting transferred from one forsaken branch to another in Purnea Module over the next 3-4 years. He got caught up again in a highway hold up and his bike was snatched never to be returned. After a long time he got an ICT to his home state, Hyderabad. He was one of the brightest and most upright officers I have known. Typical Hyderabadi, absolutely unflappable but with nerves of steel. He retired as a DGM.