Sifting through the listed 100-year-old companies to pinpoint the ones still going strong, Business Today came across quite a few banks that have been around for just as long and more or less in their present identity. (That excluded State Bank of India, or SBI, the biggest, which in its present form can at best go back to 1921, and Imperial Bank.)
Who was Mahatma Gandhi's banker? Or, Jawaharlal Nehru's, Lal Bahadur Shastri's or Indira Gandhi's? The honour in all four cases goes to the 117-year-old Punjab National Bank, or PNB. The Jallianwala Bagh Committee was also one of its eminent clients. Founded in 1895 in Lahore - now in Pakistan - as an offshoot of the swadeshi movement, PNB was the first to be launched with Indian capital - owned, operated and managed by Indians. Freedom fighter Lala Lajpat Rai was closely associated with the management of PNB in its early years.
Punjab National Bank, founded in 1895
Among other founders were Sardar Dyal Singh Majithia, Lala Harkishen Lal, Lala Lalchand, Kali Prosanna Roy, E.C. Jessawala, Prabhu Dayal, Bakshi Jaishi Ram and Lala Dholan Dass.
PNB has had its share of trauma, from the banking industry crisis of 1913 to 1917 - when as many as 87 Indian banks folded up - and the severe depression of the 1930s, to the tumult of the freedom movement and Partition. Shortly before the Partition riots broke out, PNB relocated its headquarters to Delhi.
|Events that shaped the 100-year-old banks|
1850: The Union Bank was the only banking company to receive legislative sanction
1865: Banking companies fl ourish due to cotton boom, but a crash later wiped out many companies
1913: Unchecked expansion of banks leads to a crisis; 87 banks failed between 1913 and 1917
1935: Establishment of RBI with powers to regulate currencies and money supply
1949: Banking Companies Act passed to provide a more satisfactory defi nition to a banking concern
1960: Sweeping powers to RBI to order moratorium on banks
1963: Fresh statutory provisions were added to diffuse the control and restrict the hold of business houses over banking firms
1969: Fourteen major banks nationalised
1980: Six more banks nationalised
1993: RBI permits setting up of new banks in the private sector; the birth of ICICI Bank, HDFC Bank
PNB can truly say it has been there and done that: way back in 1939, it made its first acquisition: the Bhagwan Dass Bank. It has made eight acquisitions in all, some dictated to it by the government, which took over the bank following the nationalisation of banks in 1969. "Whenever opportunity has arisen, we have been there," says K.R. Kamath, PNB's Chairman and Managing Director, or CMD, today.
Kamath came to PNB from Allahabad Bank, the oldest bank in the country. He was initially amazed by PNB's culture of systems and processes. He learnt, for instance, that the bank had a well thought-out risk management system in place. It had appointed an external auditor in the very second year of its existence, at a time when the concept of auditing did not exist. "A strong culture of corporate governance was imbibed in the early stages of the bank," says Kamath. "Even today our risk management systems are among the best in public sector banks."
Kamath says he has no worries about PNB's future. It is among the best performing banks in India. "We will maintain our position and reach out to customers," he says modestly. As the second-ranked bank after SBI by size of total business - rival ICICI Bank says it is bigger - PNB also has one of the highest net interest margins among Indian banks.
Central Bank of India, Founded in 1911
If PNB was set up in a burst of swadeshi pride, Bank of Baroda, or BoB, was the initiative of an enlightened ruler, Maharaja Sayajirao Gaekwad III of Baroda, who ascended the throne in 1881. At the time, rulers of most princely states were busy amassing personal wealth. But Sayajirao initiated steps towards setting up a sugar factory, a cotton mill and a tile manufacturing unit in his kingdom. He also realised trade and commerce could not flourish without a financing agency.
Thus, in 1884, was born the Baroda Pedhi Company. But Sayajirao soon realised it was undercapitalised and functioned more like a moneylending agency. But Baroda's business climate was by now attracting banks from other states. The Bank of Bombay rushed in with an offer to set up a branch. The Maharaja, however, was put off by the proposed riders: Baroda state would have to put in an interest-free deposit of Rs 3 lakh and transfer its treasury to the branch.
Another Bombay-based bank, Indian Specie, made a slightly better offer and nearly won the Maharaja over. But credit deposit fears ruled even then: what if Indian Specie sucked out Baroda's money and lent it to businesses in Bombay?
Bank of India, Canara Bank and Corporation Bank, founded in 1906
Sayajirao visited Europe and the United States frequently, and during one such visit in 1906 to the US, he met one Ralph C. Whiteneck, whose ideas impressed him. The Maharaja invited Whiteneck to join his government as an economic advisor. Whiteneck drafted a 25-page report on the basis of which BoB
came into existence, with a paid up capital of Rs 10 lakh. Apart from the Maharaja himself and Whiteneck, others who played key roles in setting up BoB were Sampatrao Gaekwad, Vithaldas Thackersey, Tulsidas Kilachand and N.M. Chokshi.
By 1913, it had four branches outside Baroda, including two in British India, at Ahmedabad and Surat. It admirably weathered both the banking crisis of 1913 and the Great Depression of 1929. Anil Kumar Khandelwal, who joined the bank in 1971 as a probationary officer and retired as its CMD in 2008, says: "By 1947, the bank was big enough to be among the country's top five banks."
BoB was also a pioneer in moving overseas: it took its first step abroad in 1953, with a branch in Mombasa, Kenya, then a hub of Indian enterprise. Eight years later, it landed in Fiji. Today, it has a footprint in 26 countries, with branches abroad accounting for nearly a quarter of its revenues. Khandelwal himself opened a record 11 such branches in a single year in 2007. He recalls how a Fiji minister corrected him when he referred to BoB as a foreign bank. "You are very much a part of us. You are more local than foreign," the minister said.
Bank of Baroda's founder: Maharaja Sayajirao Gaekwad III
"We are seen as a local bank in many of the east African countries, where we have been present for more than 60 years," says M.D. Mallya, BoB's current CMD. In 1969, when the government nationalised over a dozen banks, including BoB, it had the largest number of foreign branches after SBI. In the mid-1980s, it was quick to find growth in mass banking, merchant banking, housing finance, credit cards and mutual funds.
Three years after the Harshad Mehta scam, when the capital market was depressed, BoB pulled off another coup. It floated a Rs 850-crore public issue that was oversubscribed. However, the real growth has come in the first decade of the current century. The total business has jumped from Rs 1.25 trillion (one trillion equals 100,000) in 2004/05 to Rs 5.45 trillion in 2010/11. Says Mallya: "The entire edifice of the corporation rests on governance. That is a unique feature in Bank of Baroda's history."