WITHOUT COMMENTS

Excellent experiences of Waman Ghokale

I happened to read the book “Banking Beyond Books” by Sri. Waman Gokhale, an ex-Central Bank of India executive, who also writes on various banking issues through his facebook page.

His experiences narrated in the book are not only interesting but also guidance for the present day banker.    Not much has changed in the banking space; except book-keeping.

As the title rightly says, banking is mostly beyond books. In banking, problems are solved not by algorithms but by past experience using rules and regulations.

His experiences will give a new perspective on everything and will motivate the banker.    I wish that the book might be made available in libraries of all banks and their training centers for the use of bankers.

In this age of technological advancement….An ICICI experience

Somehow, I am rubbing ICICI the wrong way always.     Earlier I purchased an insurance product from them.   It took a long time to settle the proceeds for the reason that some strokes in my signature differed with the original.    

Subsequently when I started an SIP for a mutual fund product, they allotted units for the first installment.   But subsequent installments were rejected for want of KYC.   However other five different asset management companies accepted same KYC documents.

This time it is strange.    I signed up for their pre-paid wallet called ‘Pockets’ and used it for a few months.   Based on their instruction I topped it up with Rs. 10,000 on 2^nd February through NEFT from my IOB account.    However it was not credited to my wallet, the reason being I cannot top up more than Rs. 5,000 at a time.   Fine; no complaints.   I wanted my money back.    No response.   After continuous follow up, they generated a complaint number.   But no action.    Finally after repeated phone calls and threats, it was credited back to my account on 23^rd March, ie. after 50 days. 

I have some doubts:

-       For a bank like ICICI, is it not possible to return the funds if they cannot apply it to the desired account?

-       Are their IT products not sound enough to return / reject the excess funds automatically to the originator?

-       Is it not their duty to return the funds with a nominal interest, though I claim commercial rate of interest?

-       Should there not be any other way to approach ICICI bank, other than through their call centres?

I have become wiser now:

1.    ICICI is not my cup of tea   

2.    Sophisticated financial institutions need not be very efficient.  

(Of course, I took up with Ombudsman and they treated it as a complaint against IOB, is a different issue)

Banks and bankers: misused?

Now that everybody knows the state of nationalized banks; lesser said the better.

There were days when banks accepted deposits and lent funds to the needy.   There was not much intervention, either from the Government or from politicians.   Govt. schemes were very less both in number as well as in value.

Somebody thought cleverly that the footfalls in banking halls are huge and it has got a potential to market their products.    Banks became malls; called financial supermarket.   Bankers sold products, which they neither used nor understood.  

Life Insurance policies were marketed for fraction of a commission what insurance companies would have otherwise paid to their agents.   General Insurance plans were sold for the benefit of companies which otherwise would have appointed agents nationwide at a huge cost.    Health Insurance was sold without the knowledge of claim procedure.   Insurance claims, when rejected by the companies, affected the bank loan repayments, as they were sold through corporate clients.  

Mutual funds were dumped on the bank customers without considering the suitability of the scheme.   Many customers lost a portion of their principal itself, as it is inherent in such products when the stock market tumbled.    Had it been a bank deposit; customers would have got their principal plus interest intact.   Investments in all the above were paid out from bank deposits.   In other words, instead of mobilizing more deposits; bankers used to find ways to part with their funds.     We counted pennies; losing pounds.

It may also be noted that customers accepted the products, not for its quality, because it was sold by the bank.   They succumbed to the pressure of bankers to sell such products.

Marketing officers in banks think that marketing of banking product means selling of insurance and MF.   Cross-selling means offering health insurance and life insurance to the existing customers.   While serving other companies, we forgot our own existence and its purpose.   The time and energy we spent on others’ products should have been profitably spent on our products viz. retail loans, deposit schemes, foreign exchange and others.    Fee based income should have been earned from products like LG, LC, Safe deposit locker, etc. banking products instead of other non-banking companies’ products.

We also waste our own precious time in various other ways, where other institutions ride on our back:

• Collecting school & college fees
• Issuing applications for admission to institutions
• Collection of local body taxes; government taxes
• Paying salaries & pensions for Govt. departments & other institutions
• Calendar distribution by some banks
• Selling Gold, Govt. bonds
• Collecting donations
• Offering depository services; etc.

Let us remember we do not have separate trained staff for all these work; the same set of branch staff will be ‘jack of all trade’.    Their best times are spent on counting the trees; forgetting the woods.     The time and energy spent on these ‘other business’ should have been spent on follow up and recovery of our own advances.   This is the reason why our top line always improved while bottom line suffered.

Then who should be blamed?

Govt. whose business was done in the banking hall? Regulator who didn’t stop banks from non-banking business? Management? Competitors? Companies whose product was sold across the counters?  Let’s move on.

Now banks have come a full circle.   At least now banks should delink themselves from ‘time wasting – less paying – resource draining – core business affecting’ work and concentrate only on basic banking; the good old ‘accepting deposits and deploying funds’.

Target should be only for bottom line (profit target) and not for others' products.  Such sale should be incidental.

Others have misused Banks and bankers; now this is the time to introspect and take corrective action.

Banking Issues

Packing Credit (Running Account)

Recently there was a query from one of our colleagues as to how to monitor the running pc account.  Further running pc is settled every time with Inward Remittances only instead of post shipment facility.   Whether it is permissible?

The following was considered:

1.    Ensure we have a sanctioned limit for a running PC account.

2.    Eliminate PCs on a FIFO basis.

3.    Back up PCs with order / LC and order value should cover the PC outstanding.

4.    Religiously conduct stock verification / unit inspection every month and satisfy about the availability of security.

5.    Overdue PCs should be charged with additional interest wherever applicable.

6.    By watching the conduct of the account, we can gauge the average time taken for realization of export.  Follow up the outstanding PCs after that average time.   Or go by LC / order terms as the case may be.

7.    In some of the geographies, big clients prefer direct payment instead of routing bills through bank.   We can verify the order / LC terms for this.

8.    Booking of forward contract is permitted for such transactions.

9.    PC should be covered under ECGC insurance.

10. Even after receipt of direct payment, client may submit bills and it should be treated as Misc. collection bills and lodged & realized accordingly.   They may ask for eBRC at a later date to claim export incentives, if any.

11. EEFC facility can be extended.

12. Post shipment facility is not a must.   However, ECGC cover may not be available for PC after the goods are shipped.   So ensure that the time gap from shipment to realization is short.   If usance period is there, it is advisable to get at least a copy of the bill for lodgement so that ECGC cover is continued.