I was having a discussion with one of my old buddies about the efforts needed for a process to be changed in an organization. I recollected one such memorable experience, which I still remember. When something is memorable, it means that it is easily remembered, particularly if it is something special or out of the ordinary. These are experiences which involve anticipation, emotional involvement, altered perceptions of time — think about how “time flies when you’re having fun,” and they involve a process of doing and undergoing. I thought of writing down this epic moment in my life.
The banking sector plays a crucial role in the development of any country. Banks for generating credit, follow the concept of maturity transformation, i.e., using short-term deposits from savers and turning them into long-term borrowings. Considering all borrowers pay back on a timely basis, the banks are able to generate credit, stimulate the money flow within the country, and thereby contribute to the economic development of the country by acting as the strong backbone of the economy. But this doesn’t happen in reality, borrowers default when it comes to repaying their debt, hence leading to hindrances in credit creation and development of the nation.
The quality of the loans disbursed by the banks in India used to be classified on a scale of 1 to 8 known as the Health Code system when I joined the bank in 1985. The Narasimham Committee (1991) felt that the classification of assets according to the health codes was not in accordance with international standards. It believed that a policy of income recognition should be objective and based on the record of recovery rather than on subjective considerations. In addition, before the Indian banks complied with the capital adequacy norms, their assets had to be revalued on a more realistic basis of their realisable value. Thus, the Narasimham Committee recommended a system of income recognition and provisioning is fundamental to preserve the strength and stability of the banking system. The Reserve Bank of India adopted the recommendations and mandated the banks to act accordingly.
I joined Punjab National Bank (PNB) in 1985 as a Management Trainee (Probationary Officer). My initial posting after one year of training was at Aligarh in Uttar Pradesh. I was transferred to the Head Office in 1993. We were getting the loan classification statements from branches in the old format based on the date of irregularity and we used to classify each loan by calculating their respective Non-Performing Asset (NPA) status and re-calculating the bad debt provisions based on their assessed NPA status. I was associated with the finalization of the bank’s balance sheet with a special focus on the credit portfolio and bad debt provisions at the Head Office. The workload was getting too much for a bank of PNB’s size to keep continuing the entire exercise at the Head Office level. It was decided by the bank to decentralize it to the Zonal Office level in 1994 effective from 1995.
We were tasked with making the work procedures and training the Zonal Office staff so that they can pick up the job from 1995. I was made responsible for the Schedule IX i.e., credit portfolio, bad debts, and related provisions. It was planned that they will do this at their respective zonal offices and then will come to Head Office to work under our supervision to get their statements, provisions etc. discussed and certified by the central statutory auditors.
I was then a junior-level officer, and it was a great honour to lecture and explain the details to the zonal managers, senior officers, and colleagues at the zonal offices. In some big zones, the Zonal Managers were of the rank of General Manager! It was a privilege for me.
I used to report to the Chief Manager in the Credit Administration Division at the Head Office, but for NPA classification, and provisions, the concerned Dy. General Manager used to call and discuss with me almost daily during the time of finalization of the balance sheet of the bank. My Chief Manager, Mr. KI Singh, who used to jokingly say that I was responsible for all the bad debts in the bank and the consequent provisions.
Mr. CP Swarnkar was then the Dy. General Manager, who later became the Executive Director of PNB and then became the Chairman & Managing Director of Syndicate Bank. He’s a great banker whom I admire a lot.
The time was not only a time for decentralization but also for continuing with the new system having a potential impact on the quality of the bank’s credit portfolio along with the bank’s profitability. The NPA classification was a new thing and it’s going to say for a long period. I thought that although we are sending circulars to the branches, we must trust them in adopting the new classification guidelines in the right manner. I came to the Head Office from field and so I had more faith on the capabilities of the field functionaries.
I proposed to Mr. Singh a revised format of the detailed loan-wise statement of position and also the format for the register that we use at the Head Office for consolidating and summarizing the loan portfolio for the schedule IX of the balance sheet of the bank. He took it to Mr. Swarnkar.
“We are products of our past, but we don’t have to be prisoners of it.”Rick Warren, The Purpose Driven Life: What on Earth Am I Here for?
Mr. Swarnkar called me and one of my colleagues, Mr. MP Sharma, along with Mr. Singh for a discussion. It was then the month of November, and it was then getting cold in Delhi. Mr. Swarnkar asked me for the details, and I explained to him the details about the changes and the purpose. He doubted that these changes might cause a huge impact on the bank’s profitability for which he would be held responsible. He kept quiet for some time, and we could see the sweat on his forehead. He was very much worried about the risks involved in the change. He liked the idea, but he was not sure whether he would bet on my recommended changes. I knew it was a difficult decision that would change the age-old practice in the bank.
Don’t underestimate Small Humble Beginnings, because sometimes they can turn out to be the Greatest Success Stories.Jeanette Coron
He asked me what if the experiment went wrong then what would happen. To go back to the present system would be time-consuming, which delay the publication of the bank’s balance sheet and that would make the Reserve Bank levy penalty on the bank and also the bank’s reputation would be at stake.
“Always remember, you have within you the strength, the patience, and the passion to reach for the stars to change the world.”Harriet Tubman
I was confident and had trust in getting the plan a successful endeavour. I prefer to burn the ships. In 334 BCE, Alexander the Great attacked the Persian Empire, one of his most formidable enemies. Upon reaching the Persian shore, he instructed his men to burn their boats. Alexander said to his men, “Either we will return in Persian ships or we will perish here.” In the year 1519, Hernán Cortés arrived in Mexico with six hundred men and, upon arrival, made history by destroying his ships. This sent a clear message to his men: There is no turning back.
If you leave the ships in the harbor, your people will see that you’re not fully committing to the transition needed. Burning your ships doesn’t mean you can’t ever change course or decide that a current pursuit is not working. But no change process has a chance of working if your team has an off-ramp.
I told him that in the worst-case scenario when the statements are not at all acceptable, he would get me a team of officers of my choice from all the zonal offices and get the Central Staff College empties for us to stay and work there to make new statements on the existing format. I assured him that we would get each loan account of the bank reviewed and prepare a new statement in the existing format within 15 days.
After a silence of around 10 minutes, he said that he would discuss this with General Manager and the Chairman-cum-Managing Director. I don’t know what moved him, was it my idea to change, my confidence, or both! Mr. Sharma told me when we were out of his office that he was scared as my idea might have caused a stroke, the way he was perspiring in the cold.
“And that is how change happens. One gesture. One person. One moment at a time.”Libba Bray, The Sweet Far Thing
The next day, he called me and Mr. Singh. He said that he got the consent to go with the change, but I would be responsible for any untoward happening and I would have a maximum of 15 days to rectify any unpleasant situation. I would get what I wanted to get the corrections done.
“All things are difficult before they are easy.”Thomas Fuller
We, all who were involved in the exercise, worked as a coherent team with enthusiasm to succeed and determined not to fall back. The officers and Managers from Zonal Offices were also excited to be involved in the exercise. At the end, the new process was accomplished without a hitch, and the revised process was also appreciated by the central statutory auditors. we rewarded ourselves by going on an excursion trip on a weekend to Lansdowne. That was a memorable trip as nothing went right in that trip but we were together and enjoyed the whole trip.
“If you want to take the island, then burn your boats. With absolute commitment come the insights that create real victory.”Tony Robbins
The revised process with decentralization is still in practice. The forms, that I devised, were in use until the bank opted for core banking solution.
I had to do some extra efforts with the central statutory auditors to arrive at a conclusion and finalize the classifications and provisions to cover up for the inexperience of my colleagues from the zones. That was my job, which I enjoyed.
It was a matter of honour and privilege when General Managers and Zonal Managers were looking for me to request me, a junior management grade officer, to get the provisions relating to the loans of their zones finalized by the auditors. I feel blessed that the senior officers had such immense faith in me. Thank God!