Syndicate Bank fraud: What must late Dr TMA Pai be thinking ?

Syndicate Bank has been under the radar for quite a few years now. First its CEO was arrested in 2014 and  now its officials have been arrested in a Rs 1000 cr fraud.

As a learning student of Indian financial/banking history, one feels really sad to see such developments.

 

Syndicate Bank which started as The Canara Banking and Industrial Syndicate (name changed to Syndicate Bank in 1963) was an organisation found on principles of utmost honesty and discipline. The bank was shaped under the guidance of Mr. Tonse Madhava Ananth Pai who was a doctor by profession (Dr TMA Pai from hereon). How a medical practitioner without any training in banking/commerce shaped Syndicate bank  is a stuff of legends. Moreover he shaped this bank in a period when most banks failed that too run by so called professional bankers and people of commerce.

The bank started from really humble origins from the town of Udupi in 1925 with a capital of just Rs 8,000. Its deposits were just Rs 6000 and loans of Rs 11,000. That the bank was included in the list of first 14 nationalised banks tells one how much the bank achieved in just 40 years of existence. The criteria for nationalized banks was banks having deposit of Rs 50 crores and above. Syndicate Bank had doubled the threshold of Rs 50 crore by 1969 and had deposits of Rs 112 Cr by 1968 (eve of bank nationalisation). This was highly significant given how the other nationalised banks were mostly from big metropolitan cities where it was obvious to have large banks.

So in another forty years or so, the bank has been reduced to a place of high corruption and frauds. Dr TMA Pai (and his nephew Mr TA Pai who ran the bank ably till nationalisation) must be so annoyed with this development. He must be just taking solace that he is not around to see such practices at the bank he had nurtured so painfully over the years.

But then this is how it goes for most banks. At most second/third generation is able to manage the banks started by their first generation. Then it eventually moves to doomsday. Power of money which helps one grow fantastically, also plots the downfall equally quickly. The fortunate ones who survive are those who see the downfall and professionalise affairs before the calamity. The family may retain ownership control but the management moves in hands of a professional board.

Just that in India’s case, all the big and good private banks which were once run by families, were taken over by the government. So we do not know what steps these families would have taken. Continuance or doomsday?

But we do know that outcomes have been broadly similar. The PSU banks are all reeling under the challenges which could have happened to any bank under the fourth or the fifth generation. It is even more interesting that these public sector banks are suffering from the same issues against which they were nationalised.

There is a reason why students of economics/finance should be made to grapple issues pertaining to history. It just broadens your perspective like nothing else does..

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: