Vijaya Bank Merger: Protests over losing history and community identity

The Government recently cleared the merger of three public sector banks: Vijaya Bank and Dena Bank with Bank of Baroda. As per the share exchange ratio, the Bank of Baroda will issue 110 shares of Rs 2 each for every 1000 shares of Dena Bank and 402 shares of Rs 2 each for every 1000 shares of Vijaya Bank.

The merger announcement has led to discussions over viability of the merger. Bank of Baroda and Dena Bank have been under RBI’s Prompt Corrective Action framework on account of high NPAs and losses. Thus, people have questioned why two loss making banks have been merged with profitable Vijaya Bank?

Given the financials aside, the choice of Vijaya Bank has hurt emotions in a certain corner of Southern India.  The concerned corner is city of Mangalore on the western coast of Karnataka (see this as well)

Vijaya Bank started from this very city of Mangalore in 1931. The city of Mangalore along with Udupi were once part of South Canara district and were home to 22 banks in the country. Out of these 22 banks, 4 grew to emerge amidst 20 largest banks in the country which were eventually nationalised. The four banks were: Corporation bank, Canara Bank, Syndicate Bank and Vijaya Bank. One more bank- Karnataka Bank- remained in the hands of private sector and is one of the 11 old private sector banks in the country. Given the region’s proclivity for banks, there is a reason why it has affected the sentiments of the local population. After all, one of their banks is going to be lost in the merger.

Vijaya Bank was started by an eminent social reformer of Mangalore region: Mr AB Shetty. He later became member of Madras Legislative Assembly. The bank was mainly started to serve the local Bunt community of the region. Most of the South Canara banks were started by Gaud Saraswat Brahmins and served their own community.

This prompted Mr Shetty to set up a bank to serve the Bunt community.

The bank was opened on the auspicious day of Vijayadashmi and hence named as Vijaya Bank. The bank had 14 promoters which were from all of South Canara region and came from different professions such as lawyers, landlords and also included a medical doctor. Mr Shetty said that the bank was “for the benefit of agriculturists” as Bunts mainly belonged to agriculture sector.

The Bank’s best years were under Mr. Mulki Sunder Ram Shetty who transformed the bank from being another bank to a top level bank.  He joined Vijaya Bank in 1946 and rose to become the Chairman from 1962 to 1969 and remained as full-time Chairman till 1978. Under his tenure,  the bank merged a total of 10 banks and opened branches outside South Canara region. The criteria for first nationalisation was banks having deposits more than Rs 50 crore and Vijaya Bank despite being amidst top 20 banks had deposits worth Rs. 18.6 crores.Despite best efforts, the bank started with a measly capital of Rs. 8670. The initial years were particularly difficult as the bank found it hard to raise capital and grow. However, the bank managed to survive and it gradually built its balance sheet mainly around the rural region of South Canara. The Bank took a cue from Syndicate Bank and tried reaching out to small and interior centres in South Canara region. This strategy served the bank well as its main customers were in these areas only. The bank which started as a D classified bank (capital and reserves less than Rs 50,000) became an scheduled and licenced bank by 1957.

The bank grew even more spectacularly post 1969 and was eventually nationalised in the second tranche in 1980. However, the reason for second nationalisation was not as seen in the first nationalisation. Dr I.G, Patel who had not favoured first nationalisation as an economic adviser to the government ended up supporting the second nationalisation. His reason for second nationalisation was that some banks like Vijaya Bank and Punjab & Sindh bank were using unscrupulous methods for growth. In order to discipline these banks without closing them, Dr Patel pushed six such banks for nationalisation.

Despite nearly 40 years of nationalisation of Vijaya Bank, it continues to be a matter of pride for people of Mangalore and erstwhile South Canara region. Vijaya Bank along with the other 4 banks, provided employment to local population in large numbers and many a family owe their livelihood to these banks either in form of employment or financial support. There is a reason that the region continues to maintain founder branches of all these 5 banks and proudly point when one asks for directions. The picture of Vijaya Bank founder branch is this:

Thus, it was quite interesting to note how the region’s politicians and Bunt community have protested against merger of Vijaya Bank with picture of Mr. AB Shetty at the forefront.

Ivan D’Souza, MLC, during the protest in Mangaluru on Tuesday.

It has led to criticism of the local MP Nalin Kumar Kateel who is from the ruling party at the Centre and has not voiced any angst on the decision. Moreover, the MP is a Bunt who should have understood these sentiments better than anyone else.

We see muted reactions from quarters of either Bank of Baroda or Dena Bank. The protests have mainly come from bank unions who fear job losses,

The former was started in 1908 in the Princely State of Baroda by Sayajirao Gaikwad III whereas later was started in then Bombay by Devakaran Nanjee (hence the name Dena based on the first two alphabets in the name) in 1938. Both these banks mainly catered to the regions of Bombay & Gujarat and did not have similar community affinity as seen in case of Vijaya Bank.

In a way, it is only Southern region banks which voice any of these concerns. In the case of merger of five State Associate Banks with State Bank of India, one heard protests only from State Bank of Travancore. Likewise, one does get to read occasional news about local shareholders protesting in case of takeover talks of Tamilnad Mercantile Bank or Catholic Syrian Bank. Infact, of the existing 12 old private sector banks, 2 are from north India, one from west and 9 from Southern India. Most of these southern India banks started on community lines and remain deeply etched with local sentiments. Infact, this is true for even nationalised banks as being seen in case of Vijaya Bank.

To sum up, the purpose of this post was not to argue whether the merger of the three banks is economically viable.

But it was to argue how communities and people continue to matter in banking. It is sad that most banking experts continue to ignore this very important aspect of history of banking which was all around people and communities. This ignorance has worsened with rise of digital banking which thinks any human touch as draconian and antediluvian.

The protests over merger and loss of identity of Vijaya Bank thankfully shows that certain communities still continue to care for their banks.

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