100 Years of Saraswat Bank: What made the Gauda Saraswat Brahmins excel at banking?

I keep saying that 2018 is a year of anniversaries especially for banks and central banks.

On 14 September 2018, Saraswat Bank celebrated its 100th anniversary. We do see commercial banks celebrating 100 years but it is really nice to see an urban cooperative bank  also achieve this milestone of 100 years. On the anniversary, they call themselves 100 years young. Its business has grown from a mere 0.07 lakh in 1920 to nearly 60,000 crore today.

While searching for more articles on Saraswat Bank, I realised that North Kanara Gauda Saraswat Bank also completed its 100 years in 2017. Further research showed another cooperative bank- Shamrao Vithal Bank (SVB), formed in 1906, was in its 112th year.

The readers might wonder about the linkages between these three banks. The connection is that apart from being Mumbai based cooperative banks, these three banks were found by one community of Gauda Saraswat Brahmins (GSB).

It is incredible how this one community pioneered quite a few excellent banks in India. A Times of India article (Savvy Saraswats, 30 Jan 1995) noted that the GSBs “have a remarkable talent for setting up banks”. It further added that the GSBs came to Bombay from “Canara region in the 19th century, mainly at the behest of K.T. Telang, who was a brilliant scholar, vice chancellor of Bombay University and high court judge.”

Infact, apart from these 3 cooperative banks, GSBs established several commercial banks in erstwhile South Canara region (Mangalore and Udupi). I have analysed more closely the GSBs association with commercial banks in South Canara and would focus on this aspect. I would love to read from others on the cooperative banks formed by the community.

Dr. N.K. Thingalaya, the lone scholar in this field, documented that South Canara was home to 22 banks during the first half of 20th century, most of them started by GSBs. Remarkably, 3 of these 22 banks grew to become national level banks: Corporation Bank (1906), Canara Bank (1906) and Syndicate Bank (1925). Though, Corporation Bank was established by a philanthropic Muslim (see video of his poignant story here), but it was eventually managed by the GSBs. Later, Mr MV Kamath (former editor of Illustrated Weekly) chronicled history of most of these banks. The banks should digitise and upload these books which have ran out of printed books and are not available.

The South Canara District Gazetteer (1894) mentioned that GSBs had migrated long ago from banks of Sarasvati River in Tirhoot. They attached Gauda against their name to signal their origins and distinguish themselves from the other Brahmins. They first settled in Goa but due to Portuguese conquest and forceful spread of Christianity, migrated to South Canara and adjoining regions such as Bombay as mentioned above. The Gazetteer noted that GSBs were “an active and progressive class” and “had intelligent readiness to adapt themselves”. They gave high priority to education leading them to get influential positions in Government, landownership, shopkeeping etc.

In 1938, a Supplement on South Canara District noted GSBs’s had not just entered fields of law and medicine but also begun to take prominent part in “local banking”. Given their education status and ability to change, GSBs were the most suited to start English Joint Stock Banks in the region. Not surprisingly, most of these bank founders were from legal and medical practitioners. The Supplement also pointed of high female literacy amidst the community leading to women being actively employed in these banks very early in their banks’ history compared to most other banks. Even Saraswat Bank had a first lady member as early as 1924 and 216 lady members by its 25th anniversary in 1943 (Krisnamoorthy and Pawar 2008).

One may draw comparison to other communities both in India and the West which also established banks. The comparison is not apt as in other regions, the founders were mainly from mercantile backgrounds and banking was a natural economic progression for them. Whereas in case of GSBs, most of them entered banking via education, awareness and serving community. For instance, both Corporation and Canara Bank were formed in 1906 due to Swadesi impetus which started in 1905. Both the founders were driven by community service and formed banks to serve the local people and small businesses. Before setting their banks, they had set up schools in the region as well. The other banks which came up later were mostly inspired either by Gandhian movement or competition. There were businessmen and merchants amidst the promoters but hardly as prominent compared to the banks formed by other merchant/business communities.

They even differed in terms banking practices. Unlike the merchant backed banks which were built on big clientele living in big cities, the GSB banks were mainly driven by small accounts in rural locations. To make this possible, they pioneered several banking innovations to spread banking inclusion much before the term entered our lexicon.  Some of these innovations were Pigmy Deposits (which was nothing but a Thalerian nudge), low-cost branches, business correspondents, low volume & low-cost loans etc. Most of these became policies later but no acknowledgment/credit was given to these banks.

This translated into South Canara topping most of the banking inclusion indicators when RBI released the first district-wise data in 1972. After the metropolitan cities, the district had the highest number of branches and number of deposit accounts. It had the highest number of credit accounts and branch penetration.

To top it all, this inclusion was not at the cost of growth as 3 of these 22 banks were ranked as 20 largest commercial banks in India as mentioned above. All three along with Vijaya Bank (1931) of the same region (formed by another community of Bunts) were nationalised in 1969 and 1980. Nationalisation was done on the basis of size of the banks. This is significant as 13 most of the other 16 nationalised banks came from the metropolitan cities:

  • Bombay had 4: Bank of India (Sassoons), Central Bank of India (Pochkanwala), Union Bank and Dena Bank
  • Calcutta had 3: Allahabad Bank, UCO Bank (formed by GD Birla) and United Bank
  • Madras had 2: Indian Bank and Indian Overseas Bank; both by Chettiars
  • Delhi had 4: 3 migrated from Pakistan -Punjab National Bank, Oriental Bank of Commerce and New Bank of India (merged with PNB in 1992). Punjab and Sindh bank was Delhi-based.

It was natural that largest banks would emerge from these locations which were also the leading commercial areas where banks grow. But South Canara hardly belonged to this list and for it to have as many large banks as Bombay is quite something.

Post-nationalisation, the promoters lost ownership of their banks but did serve as custodians for sometime. Then gradually these banks lost their community affiliation. However, GSBs continued to contribute to Indian banking as we saw several top positions in Indian banks held by people from this community.

On the 100th anniversary of Saraswat Bank, we should not merely commemorate but also reflect on the practices of these banks. This is especially , true given how much our banking system is vexed between growth and inclusion. We see inclusion as a government- driven activity but these banks showed even private banks can achieve inclusion and that too profitably. It was more like ‘Hayekian financial inclusion’ where private banks ‘spontaneously’ emerged to serve the rural and poor and did not need the ‘Keynesian push’ as we have seen all these years. The question for us is whether we can learn some lessons from this history or just dismiss it as we do for most of our financial and monetary history?

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One Response to “100 Years of Saraswat Bank: What made the Gauda Saraswat Brahmins excel at banking?”

  1. Links for 11th November, 2018 – economics for everybody Says:

    […] An excellent read on GSB’s and the banking sector in India. […]

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