Financial Daily from THE HINDU group of publications
Wednesday, Apr 03, 2002
Money & Banking
Making effective use of rural bank branch staff
AFTER the implementation of VRS, every chairman has said that his bank has now become a lean organisation but that customer service is not affected. What they claim is generally correct, still at the field level there are certain imbalances which can be rectified over a period of time with careful planning and relocation of personnel from excess pockets.
We have already seen a positive step taken by many banks. They have eliminated one tier by closing down regional offices. There is one more area, which the industry should seriously look into - that is management of rural branches. Today the public sector banks (including SBI) have 19,361 rural branches. These branches are managed by officials in the rank of officers. The average business of a rural branch is Rs 7.67 crore.
Let us examine whether there is any need for `officers' to be posted as managers of rural branches. There are four types of officials in a bank: Officers, special assistants, clerks and sepoys. In the sixties and early seventies prior to and after nationalisation, most of the big banks recruited 75 per cent of the officers directly from the market. They were called `direct recruits'. As promotion opportunities for the clerks were limited, a new supervisory cadre called `special assistants' were created. Each bank had its own system of promoting clerks as special assistants.
In a few banks it is done as a ratio to the clerical strength. The clerical cadre never had any discretionary powers. It was there to do `mechanical jobs' or do the jobs as directed by the officers. The `responsibility' for correctness always rested with the officers. It was then agreed that the new cadre `special assistants' will take some limited responsibilities like `checking the ledgers, cancelling the cheques etc. This gave some relief to the officer cadre. But even today the special assistants do not have any discretionary powers like sanctioning of loans or incurring some expenditure.
Now let us take a look at the activities of a small rural branch: Deposit taking; lending to priority sector/recovery; and administration. The staff strength of a small rural branch is: Officers -1 or maximum 2; cashier-cum-clerk -1; clerk -1 and sepoy - 1.
The work of deposit taking does not involve any special skill. Rate of interest and other terms and conditions are well laid down. In the area of lending, an official has to use some discretion. However, in a typical rural branch only `schematic lending' is done. Agricultural loans form almost 90 per cent of the lending. Here also each bank issues clear guidelines about the quantum of loans to be given for different crops. Other schematic lending also has clear yardsticks. No big industrial lending or trade finance is done by the rural branches. The manager has to refer to the `Tables' and lend money.
The question one would want to raise is why should a bank post one officer as manager of a rural branch. Why not post a special assistant as manager. Let us give him sanctioning powers for schematic loans and authority to sanction expenditure. As the wages are standardised, he need not use any discretion. Other expenses are not huge in a rural set-up. Besides, statements of all Profit and Loss debits are always sent to the controlling authorities. Let us look at the advantages and problem areas of this suggestion. Advantages: A large number of the `officer force' will be available for deployment in semi-urban, urban and other areas;
Now like a compulsory military training `rural' posting is a must for officers to get further promotions. Being an all-India cadre, they go to totally new areas. The rural branch manager heavily depends on the clerks in the branch to guide him about local people (borrowers). The officer invariably does not stay at the rural centre but stays in a town sometimes 40/50 km away. In many cases the bank's management do permit this. The officers stay alone and take leave to go to the base to join the family. In many cases, they travel every weekend - going early on Saturdays and arriving late on Mondays! What productivity can be expected? Due to limited transfer of clerks (who are rarely disturbed and if disturbed only within a district) they are locally settled. The special assistant invariably will belong to the area where the branch is located. In many cases, the special assistant will be staying at the rural centre itself or in a nearby place. He can comfortably do a tenure of 3 to 4 years. A special assistant will have a good knowledge of local people, their customs, problems etc.
Cost-wise also, the branch will save money. The salary of a special assistant with a 10-year service as a clerk in rural area is around Rs 9,800 p.m. and for an officer it is Rs 10,787 p.m. Besides, a special assistant is not eligible for various perquisites like an officer.
Whenever an officer working as manager goes on even casual leave, a reliever is rushed from a nearest town paying the latter a substantial daily allowance. This can be saved as the special assistant may not go on leave as frequently as an officer from another area.
Problem areas: All rural branches are not small. In fact, in Gujarat, a few rural branches are managed by chief managers due to huge NRI deposits. Solution. Let us implement this first in small rural branches, say with a business mix of less than Rs. 5 crore. At least we will be able to cover 50 per cent of the rural branches. Due to lack of experience, the special assistants may give bad loans. Solution. This is a myth. First of all, there are not going to be any large advances. Risk is well spread amidst a number of borrowers. Besides loans will be for smaller amounts. If need be, the bank can fix a lower sanctioning limit.
The unions will not agree for their staff to take `responsibility' for lending or for using discretionary powers. Solution. This is a matter of negotiation. The unions today are more objective in their approach. Have they not agreed for computerisation? In the worst scenario, an extra allowance called `manager allowance' may be given as an incentive. This author had done this experiment in a bank in Africa. In fact, in addition to special assistant, even senior clerks were posted as managers. It was a successful experiment.
As a corollary to this, there is one more suggestion. There are a number of extension counters of banks. Only routine banking is done and no lending activity is undertaken. Still, they are manned by officers. When they are reporting on daily basis to a branch why not put a special assistant? Let us not forget that in today's world a majority of the clerks are all graduates. They become a special assistant after gaining experience for at least 10 years. Why not utilise them in a better manner? Will IBA look into this?
The author is retired General Manager, Bank of India.
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