Fellow Dalits, open your own bank…

Chandra Bhan Prasad wrote an interesting piece in ToI a couple of days back.

He first makes a case for how Dalit entrepreneurs pay usurious rates of interest:

On the outskirts of west Delhi, first-generation Dalit entrepreneur Subhash Singh Grover has earned a place for himself in the crane industry. A year back, he received an offer from a company to supply two cranes, both 250 metric tons in strength. He needed Rs 5 crore to commence production. Without any assets to pledge, he took a Rs 5 crore unsecured loan from a consortium of lenders at the interest rate of 15%. Since its birth in 2005, his company has spent over Rs 10 crore on interest.

Another first-generation Dalit entrepreneur from Delhi, NK Chandan makes smart electric meter covers, junction boxes and bus bars for power companies. Since 2013, he has spent over Rs 5 crore paying interest. He once took a large sum from a private lender at an interest rate of 36%.

The list of Dalit businessmen spending mind-boggling sums of money paying interest to usurious private lenders is long. Ahmedabad based Ratibhai Makwana trades in plastics. The Makwana group spends over Rs 7 crore annually on paying interest. A leader in making fishing nets, Bhavnagar based Devji Bhai Makwana spends about Rs 5 crore on interest annually. New Bombay based first-generation Dalit entrepreneur Ashok Khade has spent about Rs 10 crore on interest in the past decade. The list goes on.

He then calls upon Dalit middle class to fund their own bank:

Despite making hundreds of billions of rupees annually, Dalits have no bank or financial institutions of their own. With a little financial wisdom, and a mere 1% investment of their income, Dalits in government services alone can create banks with massive liquidity every year. Most of that money, like floodwaters, goes into the seas. Dalit middle class has not been able to tame their money into their own banks. If no one else, Dalit middle class alone can fund Dalit capitalism project that can produce Dalit billionaires worth the Indian billionaire club membership. Dalit billionaires can create a bigger spark than Dalit politicians occupying top public positions.

So fellow Dalits, awake, channelise your incomes into your own banks, build a Dalit economy the way American Blacks have built their own economy, turning American capitalism more respectable, vibrant.

Ideally, one would see banks not discriminating against Dalit businesses.  But as Mr Bhan points:

In collaboration with scholar D Shyam Babu, senior fellow with the Centre for Policy Research, Delhi, we have studied about 1,000 such Dalit businesses nationwide. This study was commissioned by the Centre for the Advanced Study of India, University of Pennsylvania. Led by then CASI director Devesh Kapur, who is now with John Hopkins University, the study concluded in 2015.

The consistent point that emerged is that most Dalit businesses find it tough to secure bank credit. Consequently, an overwhelming majority go to private lenders who charge huge interest. Some lucky ones, Makwanas for instance, get into formal banking. But it is no wonder that not a single Dalit entrepreneur is able to enter India’s billionaire club.

This is interesting. Several banks have been opened both in India and  abroad to finance/support certain communities.  One sees this trend quite prominent in Southern India. Some were named to clearly signal this community orientation as well.

The Nidhis were christened as Hindu Permanent Funds clearly signalling who they were for.  Canara Bank started as Canara Hindu Permanent Fund in Mangalore before renaming itself as Canara Bank. Even after name change, it primarily served the Gauda Saraswat Brahmin Community of South Canara region. Similarly, Syndicate Bank was started mainly via support from GSB community. Seeing banks for GSBs, Vijaya Bank was started in Mangalore to serve the Bunt Community.

In Kerala, one saw several banks named after their respective Christian/church communities: Mar Thoma Syrian Bank, Latin Christian Bank, Chadean Syrian Bank and so on. Currently CSB Bank which is undergoing an IPO started as a community bank for supporting Catholic Syrians.

Coimbatore which was hub of Nidhis had similar names: Coimbatore Sri Kannikaparamesvari Bank, Coimbatore Hindu Krupkara Nidhi and so on.

In the west, relationship between jews and banking is legendary.

Thus, history shows that community and banking go hand in hand. Quite a few communities will owe their success to their bank. I especially saw this connect in South Canara where people continued to protest against mergers of “their banks”.

So there is a case for Dalit Bank based on community networks. Just that the new proposed bank should focus on financials and not lend recklessly on the basis of community/relationships. Communities do help in establishing “their own bank” but it requires a proper financial conduct and governance to successfully run the bank. One could pick lessons from the South Canara based banks which started as community banks but hardly compromised on the financials.


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