2/27/2018 Blame technology, faceless banking for recent scams: OP Srivastava - Business Line

Veteran banker OP Srivastava talks about how private players

metamorphosed the banking industry, and PSBs emulating them are
paying a rather big price for it
AHMEDABAD, FEBRUARY 26

‘Pata nahin bhai (don’t know, brother)!’ was the expansion of ‘PNB’, went the joke in the 1960s and ’70s.

This was when Punjab National Bank, founded in 1894 and nationalised in 1969, joined the crowd of public
sector banks in the country, and PNB officials began to pass the buck on various counts. Mumbai-based
 veteran banker-turned-filmmaker OP Srivastava worked with PNB from 1977 to 1993, and later with ICICI. As
an officer and eventually as the Director (Operations), ICICI Group, he has seen both sides of banking in India
— public and private sectors.

But he gave up banking in 2014 to pursue his first passion, film direction, and won the National Award in 2015
for the Best Biographical Film, Life in Metaphor: A Portrait, based on the life and works of eminent Kannada
filmmaker Girish Kasaravalli.

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2/27/2018 Blame technology, faceless banking for recent scams: OP Srivastava - Business Line

In an interview, Srivastava said that before the introduction of higher technology and reckless expansion, banks
had a human face while dealing with their customers. As the human factor disappeared with the acceleration of
technology, it created a heterogeneous structure with systemic imperfections or gaps. This allowed
unscrupulous lending to go unchecked, subsequently leading to fraud, leakages and scams. Excerpts:

What is your take on the fundamental changes in Indian banking since the 1990s?

With the RBI giving licence in 1995 to private sector banking, technology was introduced in a big way,
bringing fundamental changes in the way banking was done in India. Technology was used as a tool to
enhance customer convenience, expand reach, handle the growing scale of operations, enhance
transparency and bring speed in the decision-making process. It helped the new generation banks to
expand their network and volume of business in a short period of time. I was amongst those who
pioneered the introduction of modern technology in the banking industry in India, including setting up
India’s largest ATM and retail branch network.

How did the introduction of technology impact Indian banking?

Coupled with savvy branding, these new banking avatars became a success story, to be envied by their
public sector competitors. The new banks changed the perception of the public as well as the
regulatory authorities about the model of banking in India. PSBs also started copying the new
technology-based model of banking. Apart from developing new means of convenience banking,
technology also brought in fundamental changes in the structure and human resource practices
adopted by the new generation banks.

The unprecedented growth of private sector banks created an exponential growth in the requirement of
manpower in these banks. In the beginning, a large number of ‘bankers’ shifted from public sector to
private sector to meet this demand, but that was not enough. Additionally, due to the introduction of
new technology-based products and services like credit cards, call centres, personal loans, car loans,
consumer loans etc, the skill-sets required by these new banks was not available in the traditional
banks.

This must have led to the induction of non-banking professionals into the banking system?

Yes. This gap triggered the recruitment of a large group of people from non-banking areas like sales,
marketing, logistics, branding, advertising, information technology, etc. Such non-bankers or product
specialists were inducted in the private sector banks at various levels to run the new ‘brick-and-click’
model. This new set of people had no grooming in the basics of banking, but were experts in their
specific area of products and services. The employee profiles started becoming heterogeneous within
these banks.
 In order to create space for these non-bankers to work within a traditional banking structure, it became

necessary to tweak the prevailing structure of the banks. It was therefore found expedient to insulate
them from the core banking functions and allow them to work in specific verticals so that they could
work exclusively for the delivery of the specific products or the services for which they were recruited.

Did this disrupt traditional banking?

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2/27/2018 Blame technology, faceless banking for recent scams: OP Srivastava - Business Line

Yes, it did. In order to accommodate these new entrants, the traditional matrix of administrative
structure, consisting of rows and columns, was reengineered. Earlier, a typical PSB had horizontal rows
representing different sized branches or business units and the vertical columns representing various
departments or divisions. Each column had its own hierarchy based on the seniority and each row has
its hierarchy based on the size of business unit. Communication in such a structure can travel
horizontally as well as vertically and diagonally in case of a specific need. This structure facilitates
communication in all possible directions within the bank. In essence, the structure helps in letting the
left hand know what the right hand is doing. Everyone within the system knew what the other person’s
role and responsibilities were. This free flowing communication in a matrix-based model of banking
ensured that any communication going out of the bank was unified, uniform and non-conflicting.

However, in case of private sector banks, saddled with a huge number of people with no exposure to
basic banking, a need was felt to house them in specific verticals or silos. They were given independent
targets and were allowed to reach out to customers based on their own marketing strategy. A number of
such product-based silos came up and they all started reaching out to the customer in the open market,
sometimes even competing with each other for the same piece of business.

How did the customer respond to new banking methodology? Did technology erode his/her trust in the bank?

Before nationalisation, a bank customer used to visit a ‘branch’ for all his/her banking needs, and the
branch manager was the sole point of contact. Suddenly, the customer found that he or she was being
independently chased by a number of people from the same bank, sometimes offering conflicting
advice in order to push a particular product. For example, one person from the bank would advise the
customer to invest money in fixed deposits, another recommended mutual funds, and the third one
tried to lure them into the equity market. Similarly, different officials tried to woo the same customer
at the same time to sell insurance, credit card, or a third party product.

This new, multi-pronged and aggressive approach of marketing various products under the same brand
was called “Universal Banking”. The idea to offer all products to a customer on a platter was well
intended. But this kind of banking resulted in one customer being targeted by a number of salesmen
from the same bank, whose products overlapped and confused the customer. This led to dilution of
trust and the banker’s word started losing credibility. The customer slowly began distancing himself
from the bank and the banker became a suspect. Today, many customers often disconnect calls from
their own bank!

At the branch level also, there are these product representatives fighting with each other to grab a
piece of the customer’s wallet. There have been instances when such aggressive marketing strategies
 have resulted in unprofessional advice being doled out to an unsuspecting customer, increasing the
trust deficit. The same pattern has been followed by the PSBs as well.

How has technology virtually ‘dehumanised’ Indian banking?

The introduction of technology did succeed in achieving a large number objectives for the banking
industry. Banking came to the doorstep of the customers, but probably it stopped there itself.
Technology was used in all areas except one: maintaining, sustaining and strengthening the bond of
trust between the bank and the customer.

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2/27/2018 Blame technology, faceless banking for recent scams: OP Srivastava - Business Line

In the new model of technology-based banking, the very first casualty was the relationship between the
customer and the bank. Instead of being a person, the customer became just a number for the bank.
The new concept of looking at a customer just as a ‘digit’ was a questionable approach. Thus
technology diluted the emotional connect between the two making the relationship more and more
impersonal. Technology increased the number, the reach, the volume and the spread but failed to
enhance the bond of connectivity. It brought in speed and cost-effectiveness, but also insensitivity. It
made the customer-bank relationship impersonal and to some extent inhuman. Wallet, not the face,
came to the fore.

How did non-bankers in the banking system impact its operations?

Due to their influx, the performance reward system was tweaked, especially in the private sector banks.
Instead of the prevailing ‘team approach’, the new mantra was to award the ‘best achiever’. Earlier, the
banks encouraged ‘team performance’ and rewarded a ‘functional unit’ rather than any individual. The
private sector banks, however, introduced the concept of rewarding individuals based on their
achievements for the delivery of a single product or service. The financial rewards in terms of bonuses
and perks were also attuned to individual performances, based on their star ratings, rather than the
performance of a team or a unit.

This individual performance-based reward system, in a way, diluted the concept of a team’s
performance or the shared responsibility. The creation of silos and the vertical movement of the people
within a silo ensured that the banks started producing product specialists rather than ‘bankers’. Slowly,
the bank started getting divided into a number of insulated ‘gated communities’ which were able to
exist on their own without having the need to interact with the outside world or even within the bank.
This non-traditional banking structure has now been more or less adopted by all the PSBs as well,
primarily because of their desire to emulate the aura of private sector banks.

Have such ‘gated communities’ in the banking system adversely affected traditional wisdom about banking?

Of course. This kind of isolated gated community structure within a bank ensured that one
‘community’ within a bank had no need to know what the other ‘community’ was doing.

The dissemination of information or knowledge also started travelling in silos generating domain-wise
experts or specialists, rather than ‘bankers’. The concept of a well- rounded banker gradually met with
a slow death.

Today, one can come across a person working in audit or IT department of the bank, who has never
been in field banking. As a result, when he is supervising the development of an IT-based solution for
opening of a Letter of Credit, the insights of hands-on-experience of grassroots banking would be
 
missing. Similarly, a product specialist assigned to do the audit of branch banking would find himself
handicapped. These kinds of gaps or imperfections in the system, if not fixed, may cause structural
damage to the backbone of banking. Slowly, the integrated backbone of the bank would develop gaps
and fissures weakening the very edifice of the industry.

You have worked long years with PNB. What, in your opinion, would have actually happened in its Mumbai’s
Fort branch recently?

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2/27/2018 Blame technology, faceless banking for recent scams: OP Srivastava - Business Line

The happenings at the Fort branch is a small manifestation of the systemic decay which has been
allowed to seep into the banking industry in the name of faster growth and expansion, leaving ‘isolated
corners’ outside the purview or the vigil of the centralised or the unified operating and monitoring
system of the bank. We now have a situation in the banks where the left hand does not know what the
right hand is doing. The gated-community culture has now spread all over the banking industry.

It fact, the phrase ‘pata nahin bhai’, which was once used to refer to the ecosystem in a particular bank,
can now be used for the entire banking industry, wherein one ‘island’ can continue to issue a stream of
Letters of Undertakings (LoUs) without anyone else in the system coming to know about it.

This is what, I feel, has happened in the Indian banking system, where fraudsters have managed to
fleece the banks without many in the system even knowing about it.

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