I entered business in 1962. In my 56 years’ experience, I have had abundant opportunities to access and benefit from the explosive growth in banking.
In the pre-1969 era, banks were under the total control of private business leaders who were not much concerned with social and other development issues. Their focus was to make profit. For small businesses and start-ups, commercial banks just served the purpose of collection of and payment for cheques, with their paying a fee for the services.
I started banking with Bank of Baroda. I was careful in managing the accounts within the value of cheques deposited. Outstation cheques used to take indefinite time for realisation. From time to time, with kind managers cheques could be discounted.
Banks were stingy not just with small businesses but also with government. The renowned civil servant G Ramachandran in his autobiography Walking with Giants, mentions the refusal of commercial banks to lend for welfare schemes of the state government. Later he was happy to associate with social control and nationalisation of commercial banks spearheaded by Prime Minister Indira Gandhi.
Till 1969 when I was publishing four magazines. I continued banking exclusively with Bank of Baroda. An interesting turn of events in that year opened the way for expanding my exposure to banks as a lender.
My first car. Thank you, IB
Some 15 months after launching IE, I was keen to graduate from the rider of a two-wheeler to that of a car. I had accumulated Rs 7000 which could buy a used car. However, in June 1969 I opted to go for a new one. The small car, Standard Herald, priced a little over Rs 18,000, looked attractive and affordable. K V Srinivasan, then at the helm of Standard Motor Products, promised to deliver one right out of the showroom and gave an invoice. My manager at Bank of Baroda, with which I was operating my account for seven years, turned down my request for a loan. My friend A P Anantharaman at Indian Bank nearby, said only the Chairman or Secretary of the bank could help. I fixed up an appointment with Secretary, L Balachandran, to meet him at his stately office at Esplanade. I dropped in a few minutes ahead of the appointed time, greeted him and presented my case in a torrent of words, non-stop: “I am keen to buy a new car priced Rs 18,000. I have Rs 6000. I need Rs 12,000 as a term loan for four years. I can repay this at Rs 250 p.m plus interest. There is not much risk involved: Indian Bank has been releasing advertisements worth Rs 3000 per year in IE.”
The portly officer looked intently at my lean figure and said: “take it!”
Even before I reached home, the T Nagar Branch manager Anantharaman had phoned thrice. When I called him, he asked: “what have you done? The Head office asked me to lend you for the car. You don’t even have a bank account with us!”
Next morning I deposited Rs 6500, opened a current account and also requested for an overdraft facility of Rs 5000. Anantharaman sanctioned Rs 3500!
IB continued as bankers of IE over the next 33 years; I retained the accounts of my printing unit with Bank of Baroda. Between the two, thanks to nationalisation when the banking facility turned from class banking to mass banking, small business enterprises like mine could access a broader range of facilities.
Bank of Baroda, because of its size and much better systems and processes, was far ahead of the other 13 banks that were nationalised. Its team of young officers heading the bank’s Multi-Service Agency, sought out customers, making frequent visits and extending help in several ways. This was beneficial to me in two ways: first, to keep in touch with the bank officials right up to the chairman and report extensively on their exciting schemes. Second, the familiarity also helped expand my business horizons. I felt confident about the prospects for accessing loans for business expansion and embarked on an ambitious plan to import printing machines and the needed accessories. The prized ones were a sophisticated printing machine from Polygraph-Germany, a linotype machine from the USSR and brass matrices from Italy.
The young team of managers from Bank of Baroda was quite helpful in guiding me to process the imports. The imports took long; to ensure timely production of the fortnightly issues of IE, I went for a used linotype machine and an indigenous printing machine. These were acquired through bank loans.
Margin money for land: Thank you IOB.
My operations shifted to Guindy to a rented premises of the TN Small Industries Development Corporation (SIDCO) in the industrial estate, Guindy. When SIDCO offered 16 new properties on soft term loans, I applied and got one of these allotted. There was a need for the margin money of Rs 25,000 for acquiring the property. With few term loans still in force, my finances were tight. With my faith in banks, I approached Manager T N Padmanabhan of the T Nagar branch. After pleading with him for an hour, I was upset in not making any progress. In a fit of rage, I left the file at his table and rushed out of the bank yelling that the bank was only for big businesses and drove back to my office.
In a couple of hours, the kindly Padmanabhan had sent two young officers, Adhinathan and Nagarajan. They patiently sat with me and filled the needed particulars in a new set of application forms and got them signed. Padmanabhan sanctioned the Rs 25,000 loan the next day! What a foundation for this property blossoming into Economist House that so liberally supports IE for 35 years since! The bank continued to lend for further expansion. Through the 1990s we added additional equipment all built on term loans on standardised terms – 30 per cent margin money and a 36-month repayment schedule.
In parallel, we had facilities with Indian Bank on liberal limits for import of newsprint, purchase of cars and short-term credit facilities for particular requirements like the production of annual numbers.
Economist House – Thank you IOB!
The plan to construct a modern commercial building demolishing the old structures proved a vital watershed. A Ramakrishna of L&T graciously offered to construct the building for us. I was able to fund on my own 60 per cent of the cost, but required the
balance. Indian Bank sat over the loan proposal for long. Unfortunately, in the late 1990s it was a bad patch for the bank still struggling to come out of its bad days. When the application was still dragging on even after L&T ECC commenced construction, I put the IB GM Santhanam on notice of a week. When the decision was still not made, I walked into IOB, then headed by SC Gupta with R Natarajan as Executive Director. I was familiar with both and had been applauding the bank’s sterling performance. The response was positive with Natarajan directing GM Credit, R Krishnan, to do the needful. By the time I returned home, the chief manager of the Guindy branch, Ramarao was already waiting for me!
Rao took the needed particulars and got the loan sanctioned the next day! The building was constructed in just eight months!
Double whammy!
There was a moratorium of a year and repayment spread over five years 2003-08. A few months into the loan, I came across news of a foreign line of credit in dollars available with IOB. The terms were attractive: interest at LIBOR plus 3.5 per cent. LIBOR at that time was 1.5 per cent. So the rate of interest was 4.5 per cent in dollars against 13 per cent contracted earlier in rupees. I opted to switch to a dollar loan. The bank quickly converted the rupee loan to a dollar loan. I was not familiar with hedging for currency risks.
Greater luck was in store: in a rare run, the rupee appreciated from around Rs 46 per dollar at the time I opted for conversion to around Rs 43! There was thus handsome savings on this score as well!
Thus my experiences with banks were pleasant and profitable. Succession of bank managers has been extremely helpful and considerate, and these very much helped the growth of my business.
With healthy finances, we have reverted to the early phase of using the banks as collection agents and not beyond. But we do witness massive changes in technology and, in parallel, of spiralling costs.
Banks have moved far away from intimate customer relations. Regular visits of managers like Padmanabhan and Natarajan, Ramaswamy, Ramarao or Rayar or my visits to bank branches have ceased. Today there is little difference between dealing with an ATM and a chief manager – both are inert and lack sensitivity. I notice little interest or capacity to evaluate proposals quickly nor are they managers keen to retain the customer. The passion and enthusiasm of the young team of managers in the initial years of nationalisation are sadly missing. The small sector that enjoyed priority status in interest rates, seems to have cost it. – SV
