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August 4, 1997

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When Indian banks led the way

Looking up to foreign banks for innovations in technology and practices may be in fashion these days.

But the fact is that well before Independence, the country had a well-developed banking system which had to its credit many first in areas of mass banking, rural financing, and savings mobilisation.

Pioneers in Indian banking like Sorabji Pochkhanawala, Sayajirao Gaekwad, Pherozeshah Mehta, David Sassoon, Cawasjee Jehangir, Shapoorji Bharucha, P D Tata, Chunilal Saraiya, and Goverdhan Das Khaitan, set up banks like the Central Bank of India, Bank of Baroda, and the Bank of India to promote the country's trade, economy, and public savings.

The Central Bank with its swadeshi outlook under the stewardship of its founder Sorabji was the first to introduce the concept of home savings (1921), safe deposit vault (1926), ladies savings bank department (1924), issuance of cash certificates on the lines of postal cash certificates, setting up of mandi offices for rural credit, and floating of trustee companies at home and abroad (1929) for management of estates on behalf of clients.

Notwithstanding emerging norms in the banking system, these banks followed the system of gaining their clients confidence by announcing their assets and liability statements every fortnight. Besides entering clearing houses, the Indian managed banks also took the lead in introducing cheques and rupee travellers cheques.

With a view to promote savings and encourage home industries among farmers, Sorabji and Sayajirao always stressed to need for setting up more and more banks in rural areas.

For instance, Sayajirao Gaekwad in 1908 set up a commercial bank called the Bank of Baroda to rid his state of 'pedhis' who dominated the financing business and lent money at exorbitant interest rates. He believed that a commercial bank would prove to be a powerful factor in the development of art, industries, and commerce in the state and the adjoining territories.

After surviving the great depression of the of the 1930s in the banking industry, the Bank of Baroda was perhaps the only bank in 1936 to decide that no person educated below matriculate level could be employed as a clerk and that branch inspectors should have qualification from the British Institute of Bankers. Graduates of only reputed foreign institutions like the London School of Economics were considered for the post of branch manager during those days.

Even in the post-Independence period, it was the first Indian bank to establish itself in Latin America by opening a branch at George Town in 1966. It opened its first overseas branch in Mombassa on December 14, 1953. Notwithstanding the growth of Indian-owned banks in the British Raj, there were sharp differences in the attitudes of individual bankers who frequently engaged in rumour mongering against each other's institutions.

This is reflected in a speech made by Sorabji in his last years in which he remarked that unhealthy rivalry, competition and a ruthless interest rate war had led to a situation where the Indians banks round it impossible to make even personable profit. As a banker, Sorabji was always on the look out for fresh and innovative banking ideas.

Similarly, Sayajirao, in his address at the inauguration of the Bank of Baroda in 1908, had said, "Sentimental patriotism alone would not get us economic in dependence. We must firmly and patiently get ready to obtain control over the modern methods and instruments that have ruled over us."

"If industrialisation increases," he said, "cheating and corruption would vanish. We would be unable to bring about a successful and a permanent change in the economy of our country without individual competence, sincerity, hard work and foresightedness."

UNI

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