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S. Parthasarathy

THE passing away of R. K. Talwar marks the end of a distinct era in Indian banking. The Hindu notes that he was the `Father of SSI (Small Scale Industries)'. But Talwar's contributions to the banking industry cannot be limited to SSIs. The impact he made was more sweeping, had become the benchmark of the banking industry's coming of age in the 1960s and the 1970s.

The business world is familiar with Talwar's important role in the flow of bank credit to SSIs; but less known is the fact that he brought about a sea change in the attitude of the banking system to SSIs. The banking system in the 1960s was filled with primitive attitudes to managerial accountability. Talwar saw this as a major barrier to the development of SSIs through banking support and boldly came out with the decision that, in the area of SSI financing, so long as the officers/managers were not guilty of mala fides, and so long as the appraisal of the credit was in order, the officers/managers would not be held accountable for errors of judgment. The result was amazing. SBI's performance in the development sector of credit was leagues ahead of all the other banks.

Talwar laid great stress on proper and comprehensive credit appraisal. The beginnings of a credit rating system were also founded through his initiatives. He asked the credit officers to make unambiguous recommendations. Fairly convinced that the appraisal system was the best safety net he could think of, Talwar astonished the corporate world by offering to surrender guarantees of managing agents and/or directors in lieu of a fair readjusting (upwards) of the lending rate.

Another important area in which Talwar's innovative approach fetched profitable results for SBI was the issue of pricing of products and services. Until the early 1970s, there was no scientific basis in SBI for pricing products and services. For instance, the rate of exchange (commission) for discounting a trade bill or a cheque and for collecting the same instrument was the same.

The fee structure completely overlooked the fact that while discounting an instrument, the bank was laying down funds upfront and while collecting the same instrument, the bank was enjoying the float — the very opposite. Talwar introduced more rational and rigorous pricing models and attitudes. These sweeping changes did not spare even the Government. SBI was then the sole agent of the RBI for conducting the treasury business of the Central and State governments. For this service, the RBI paid a compensation that did not meet even a fraction of the cost. Talwar raised this issue with the RBI and persuaded it to accept a third party assessment. Thakur, a leading private chartered accountant (who was to become a Minster of State for Finance in later years), was appointed for this purpose. As a result, the structure of compensation for SBI for conducting government business was placed on a rational footing.

When human resource development was still a relatively unknown management jargon, Talwar propagated the idea of human and social capital. He took personal interest in officers who he thought had the potential to grow fast; he called them for discussions, often over the heads of their superiors who were also involved in the matters discussed.

Talwar's tenure as SBI Chairman was also coincidentally a period when the trade union movement was getting to be aggressive and confrontational. This was particularly true of the unions in the banking system. The bank saw quite a few confrontations, strikes and agitations, as a consequence.

Talwar's equations with the RBI were always excellent. Because of his strikingly original and thought-provoking policy insights, he was always consulted by the RBI's top brass when it formulated important banking policy. Talwar was the SBI's first technocrat Chairman. Prior to him, SBI/IBI Chairmen were invariably appointed either from the ICS/IAS cadre or from the top management of the RBI. He, therefore, had to prove himself and demonstrate the stuff of which bank managers were made of.

He retired with his wife to Sri Aurobindo Ashram to lead a simple and quiet life. When the Ashram was getting to be a bit uncomfortable with internal squabbles, he moved out to a small sparse portion in a street house in Pondicherry.

(The author, a former managing director of SBI's Overseas Operations, is now adviser to Apeejay Group of companies.)

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