On 30 March 2016 the Economic Times
(Kolkata edition) published an article by Mr. Atmadip Ray and Ms. Saloni Shukla
on Bandhan Bank and IDFC Bank, the two new kids of banking on the block. At one
place in the article I came across these words, "Few in the country
barring Rana Kapoor of YES Bank has had the experience of creating a bank from
scratch."
This surprised me. I did not expect a
venerable daily like the ET to err in such a fashion. To set the record
straight, on 11 April 2016 I wrote to the ET pointing out that I was one of
those who were involved in setting up one of the first few commercial banks. I
was employed with 20th Century Finance Corporation Limited (TCFC) in Bombay as
Vice President when, in January 1994, the first 'Guideline for setting up
commercial banks in the private sector" was released by the Reserve Bank
of India. On behalf the organisation, I was given sole responsibility (while
holding charges of other departments as a VP) for the project to set up a
commercial bank.
Mr. Dev Ahuja, chairman of TCFC, had always
been keen on banking business. He jumped at the opportunity when the RBI
announced its new licensing policy. TCFC was to be the main promoter (ADB and
IFC, Washington came on board later). Mr. V. S. Srinivasan, Vice Chairman,
TCFC, a brilliant mind and a genius at project management, steered the project
from start to finish. (I learned a lot from him). The bank was named the
Centurion Bank Ltd. Yours truly picked
the name, was a signatory to its Memorandum and Article of Association, and
also selected its HQ. How that came about is another story!
Mr. D. R. Mehta, Deputy Governor, RBI (now
retired) was in charge as the head of DBOD. Dr. C. Rangarajan (now in New
Delhi) was the RBI Governor.
The new banks were being set up at a time
when no one – including those in the RBI – had any experience about setting up
a bank from scratch. How the RBI and ourselves learned from each other as we
went along, what we went through for setting up the first such banks in India –
are tales that were unique, never to be repeated, and possibly will remain
untold for ever. I have with me some of the old files, several on floppy disks
in Wordstar and Lotus 1-2-3 (know what these are?) that would be lost along
with me. Would any archive want to have them? I don't know.
My entire resource consisted of a desktop
computer. All the files were on that computer, along with those related to my
job at TCFC. No manpower support was given. Back then, I had no idea about the
necessity of taking back-ups. I shudder to think what would have happened if
that computer had crashed. Probably, Centurion Bank would never have been born.
And most likely, I would have been out of a job!
Business Standard did a feature in
"Money Manager" on a few of us – including Ms. Chanda Kochar and
myself - who were leading the operations on behalf of our respective
organisations at that time. (Our photographs were published in the supplement;
I still have a copy). A bright young journalist named Pankaj Aher from Business
Standard (now Chief Executive Officer at Cogencis Information Services Ltd.)
interviewed me at my residence on a Sunday afternoon In Bombay, and wrote the
feature. Sri R. Srinivasan, an eminent journalist (now Editor - HBL) was in
touch, closely tracking developments. Dr. A. C. Shah (may his soul rest in
peace), former chairman of Bank of Baroda, was in charge of setting up the bank
on behalf of the UTI. A thorough gentleman, he became a mentor and a friend in
days to follow.
Together, we struggled to create a
five-year spreadsheet template for a brand new commercial bank. Identifying and
selecting the essential parameters, creating a framework for sensitivity
analysis, were serious problems that had to be resolved in double quick time.
Unlike today, information was hard to come by then. While going about the
business of creating the new banks, I realised that no one had ever drafted a
memorandum or an article of association for a new commercial bank in the
private sector. There was no template, no precedence to follow. Top legal firms
in Bombay could not help, nor could the RBI. “Write whatever you want. But
don’t bring it to us. If something you include is against the Banking
Regulations Act, it will be invalid anyway!” they told me. There were many such
instances of ‘creative banking’.
It is definitely not common knowledge that
the limit (cap) on the voting rights was enhanced from 1% to 10% only at our
(20th Century's) insistence. We fought hard for it, reasoning that roping in
other financial partners and financial closure could otherwise have been very
difficult, if not impossible. It may also not be common knowledge that along
the way, I created and implemented, for the very first time in India, what
everyone today knows as the 'centralised banking system' or 'core banking
solution' (CBS). (That story too would appear here later.)
Too many 'i's were to be dotted, too many
't's were to be crossed. The problem was, no one had any experience to fall
back on, no reference to go by – no one had set up a bank like this before! The
RBI wanted the new generation banks to be technology driven. But no one had the
foggiest idea what the software platform was to be. Almost every step that we
took felt like being for the first time ever. As a banker, I was extremely
fortunate to be at the right place at the right time to have this unique
opportunity to set up a bank – an opportunity that few bankers could ever have
dreamt of having in his/her entire lifetime.
When the regulatory doors were widened
further years later, when a few more licences were issued by the RBI, the
banking industry in India already had a well-defined, tried and tested road map
in place for setting up commercial banks in the private sector. When we had
stared, we surely did not. We created the road map, did all the pioneering
work, working side by side with the officials at the RBI. It was a fantastic
experience, a whole new learning process – sadly, not of much use today.
Centurion Bank is no more; it's long gone.
It went through two mergers, the second and the last being with HDFC Bank which
took over the bank entirely. However, when the history of (post liberalisation)
Indian banking is written, I hope that these facts are not overlooked or
entirely forgotten, but find their rightful place at least by way of a small
footnote on the pages of the history of Indian banking.
