Banking on integrity

You too, State Bank?” exclaimed many knowledgeable people in 1992, in utter disgust, when it became evident that State Bank of India was also caught in the swirling muddy waters of the biggest stock market scam, known as Harshad Mehta scam. Till then, the Bank was perceived as an institution of highest integrity, but that reputation was seriously dented by its involvement in the scam.

My close friend and colleague R. Narasimhan then said the Bank would not have acquired this opprobrium had V.S. Natarajan (VSN) been at the helm. VSN retired as Chairman of the Bank in January 1983 and passed away peacefully at the ripe age of 90 in January 2013.

Scrupulous adherence to RBI norms

VSN directed the staff working in the Bank to scrupulously follow the policies and guidelines issued by the Reserve Bank of India. Not for him the temptation to indulge in unapproved activities just because other banks disobeyed the diktats of the RBI and made huge gains in the bargain.

In the mid-1970s, deposit interest rates offered by banks were kept low by the RBI and most deposits flowed into public sector banks due to their ownership by Government. Some foreign banks were keen to get the deposits and started offering higher “interest rates” by a scheme called “portfolio management”: the money was reportedly invested in high yielding Government securities and the customer got higher interest.

The scheme was a sheer fraud. No specific securities were identified and the customer was paid the full principal even if the value of Government securities fell at the time of repayment. The RBI also turned a blind eye to the repeated protests of PSU banks against the wrong practices of foreign banks. VSN refused to follow those practices of foreign banks.

VSN was Managing Director of SBI for many years when his predecessor P.C.D. Nambiar was Chairman of the Bank. Nambiar was outward looking, especially to opening up in foreign countries, whereas VSN kept the Indian operations on safe and sound lines. Nambiar was the Utsava Moorthy (roving God) while VSN was the Moolavar (the idol in the sanctum sanctorum of the temple). After the two left, the Bank succumbed to the inexorable pulls of profit making at any cost. SBI gradually came very close to some share brokers of dubious reputation and lost its basic values.

Personal integrity of highest order

Besides ensuring institutional integrity, VSN practised personal integrity of a very high order. He would not accept any gifts from his subordinates. Once a senior executive heading a foreign branch of the Bank visited headquarters and called on VSN who was then MD. It was, in those days of draconian foreign exchange controls, customary for officers working abroad to bring fancy gadgets and present them to their superiors in India. Everybody in the Bank knew that if such objects were presented to VSN, it would result in a black mark on the official. The executive wanted to give something, following the Indian tradition of giving gifts, when calling on superiors. Finally, he gave a box of cigars, with trepidation and it was just tolerated.

VSN was also zealous that people working under him should not be tempted to swerve from the narrow and straight path. Once a reputed company banking with the Bank floated a share issue. As was customary, the company offered shares (under promoter’s quota) to SBI officials. I was handling that account and a senior executive of that company of impeccable integrity requested me to accept some shares of the company under that quota. Although there was no discount in the price, it meant that one jumped the queue of share applicants and got full allotment whereas others got less than what they applied for.

VSN sent word to me that I should refuse the offer of the company, because he felt that it was unethical. Very few seniors would have such concern about the values to be pursued by their subordinates.

VSN was generally reticent and withdrawn. But he had developed an intelligence network by which he gathered information about the personal predilections of the officers in the Bank. When an efficient official reportedly bet on horse racing, VSN took particular care to warn that official against gambling.

Many of the present day bankers occupying the highest levels in banks have come through the mill by excelling in a particular field, such as lending, forex, investment banking, personnel management, etc. They should emulate the three cardinal principles VSN adopted throughout his long career in SBI: Personal honesty, institutional integrity and keeping a tab on senior subordinates outside the office.

May VSN’s soul rest in peace.

(The author is former Deputy Managing Director, SBI)

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