37th National Convention of the ICSI- An overview

The convention with over 1000 delegates, Minister of Corporate affairs as invitee, people from various parts of the country….yes it is the Grand 37th National Convention of the ICSI held from 5-7th November 2009 at Hotel Mariott, Hyderabad.

Being a local resident of Hyderabad, I had it easy to locate the venue. There were about 10s of counters for registration of delegates and thanks to Hyderabad Chapter, I had my delegate number that helped in getting the kit within no time. The kit was a beautiful black laptop bag, with pens, a few business cards, a t-shirt with ICSI logo in the front and Bajaj Allianz logo on the back (which was dissented by many) and brouchers from the sponsors. After the long queue at the entrance, I entered the convention hall which was decorated professionally with a big screen for clear view of the happenings on the dais, a balcony to accommodate delegates that wouldnot fit into the convention hall, ICSI banners, sponsorship banners, a big welcome screen behind the dais, etc.

Skipping the minute details of the lighting of the lamp and Council members taking the dais let me get into the happenings straight away. The curtain raiser that gave an insight into the 3-day programme was organized very well. The Awards for best chapter and other categories including moot courts and related stuff were well-organised but the award winners were concentrating more on photographs being taken rather than the big trophy in their hands. The release of convention souvenir, Secretarial standard 10 and other ICSI publications had the Council members showing off their teeth and flashing the publications rather than anything else. The host who announced the names was amateur and a lot shaky. Probably the Hyderabad chapter could have chosen a better host for such an important event.

Mr Salman Khurshid, Minister of Corporate Affairs was the guest for the inaugural session, believe me…he was simply superb in delivering his message to the members. He was crisp and to the point. A politician having such indepth knowledge of the subject along with command over the language is quite unbelievable.

The first technical session on Managing growth in turbulent times had many delegates dozing off while Mr Pramanik was delivering his message. But, Ravi Kashtia and Jim Brady were interesting speakers. They highlighted on ways and means to manage growth with their slight humour.

I don’t prefer going into the nitty gritty of each technical session, but each speaker was excellent and an expert in his subject. Especially the dynamism and sharpness exhibited by Ms Vijaya, CS of Bharati Airtel is worth mentioning.

I didn’t prefer to stay back for the cultural evening and dinner that followed.

The second day of the convention started off with 5K run for a cause…well, I didn’t participate again. After that, a special breakfast for women was organized. This had 3 speakers; one from Administrative wing of the AP govt, one industrialist and another was a founder of well known social welfare organization. We even had the first Woman president of the ICSI and First ICSI-SIRC chairperson with us. Each one had different insights into the women problems, ways and means to tackle them. The bottom line was to have a good networking circle amongst ourselves to better our personal lives.

The open house session with the central council members was good. Many of the CS had different sorts of complaints on the response of the Ministry or the council or the student services. There were also many satires on the working of the ICSI which were intelligently handled by the Prez ICSI

Thereafter, the technical sessions are as usual boring stuff which had many delegates going out for networking or discussing business and some were dozing off, myself being one of them.

This was followed by a brief lunch that did not have soup but had plenty of fruit salads and other goodies. There was separate section for non vegetarians too.

The trip to Ramoji film city (RFC) was a chaos with so many delegates ending up into confusion whether to get into a bus or not. The entry at RFC was organized well, the stunt show was over crowded and so was the Action theatre. The tour through the RFC was excellent with an enthusiastic guide explaining each and every thing in detail with a pinch of wit. Most of us felt that the time was insufficient as it started to get dark by 6 PM itself.

The hot coffee on one hand, cookies on the other with the serene blue sky overhead and neatly towed green grass underneath was a superb experience. At 7 PM the cultural show began under the blue sky. There were dance performances, one minute game shows for the participants, comedy stints by well known comedians and few gymnastic wonders by the RFC people.

Dinner was also served simultaneously and this has a separate section for Jain food too. As dinner was coming to an end, it started to rain cats and dogs and the pleasant evening was forcibly wound up at 8.30 which would have been at 10 PM otherwise.

The day 3 of the convention began with a breakout session on M&A under competition regime and Tax reforms simultaneously in two different halls. The speakers for M&A were wittier than others of their genre and the delegates had an excellent time in understanding the concept.

This was followed by an interactive session with the Jt Secretary to MCA, a dynamic lady with elegance and intelligent charm of her own. She coordinated the session, took all the inputs from the delegates and briefed the members on the happenings at the ministry, the efforts put in by them and the like. Overall, the session was lively and highly useful for the members present.

The Valedictory session was the most emotional part as it was the point where all the delegates part away with a promise to meet at the next National Convention. The Prez ICSI gave a brief overview of the 3-day convention, thanked the delegates, organizers and all those who made the convention a grand success. He also highlighted the records that were broken at the convention. The 3-day convention came to an end with a special lunch.

LAZY BANKING

In 2005 managerial autonomy to PSBs by leaving assorted decisions (acquisitions, closure of unviable branches, opening overseas offices, human resource policies) to boards was highlighted as a part of de-regulation of the Government. The buzzwords then were "competition, corporate governance, and independent directors". But the buzzwords now are "government control" and government is not to be confused with governance.

The nationalization of banks in 1969 was aimed t improve credit delivery, expand the areas of banking in rural India and encourage the small-scale industries. Nationalisation was introduced to further regulate the Banking industry apart from the RBI and the Banking Regulations

Apart from Nationalising Banks, restrictions were imposed on composition of boards of directors and on bank lending to units that directors were interested in. But then, credit delivery or populism of the late 1960s and early 1970s was only one part of the jigsaw. This statement can be observed from the preamble to the Banking Companies Act of 1970 wherein it is stated that "an Act to provide for the acquisition and transfer of the undertakings of certain banking companies, …….. in order to control the heights of the economy …………….and for matters connected therewith or incidental thereto." The key word was 'control', but not regulation. Opposition to privatisation of public sector enterprises isn't about strategic sectors and market failure. It is about losing control. The heights of the economy became the depths.

The fiasco of nationalization was extended and the fall out was seen in September 2006 that wrought havoc in many ways. First, since government equity was declining and public shareholding increasing, the number of independent directors was slashed. Second, possibility of nomination from SEBI, NABARD and public financial institutions was removed. Third, the number of full-time directors was doubled (from two to four). Fourth, "excess" directors were made to retire, on a first-in first-out criterion, that is, on basis of seniority. Fifth, SEBI'S attempt to push corporate governance was a problem, since SEBI'S suggested draft amendment to Clause 49 of the Listing Agreement proposed that directors nominated by government or public financial institutions wouldn't be counted as independent directors.

The expression “lazy banking” was coined a few years ago to describe the “Public Sector Banks” and their way of banking. The desks at Public Sector Banks are strewn with papers, bulletins and what not…and every one seems to know what exactly is demanded of them. But again, this did not change anything not even the credit delivery in the least.

The nomination of Independent Directors has turned out to be a matter of graft and reward and their expertise never entered the rulebooks of the Banking industry. Probably a CRAZY Banking approach to the banking formulation will wipe away the lazy Banking in India.

The Lazy banking has resulted in corporate India generating income without availing the Bank Credit which is a severe indictment of Indian banks and this inertia is a symptom of deeper malice.

During 1998-2003, the Banks ignored Lending to commercial sector and the funds were extensively invested in Government Bonds. Ironically, this strategy did not harm banks. The cut in interest rates by the RBI in 1999 the Banks that invested in Bonds profited. The Banking sector earned huge profits irrespective of whether the profiteering Bank was a weak one or otherwise. These profits were utilized to the “cleaning of Bank’s Balance sheets “popularly known as wiping off Bad debts and raising of capital.

On the other hand, denial of credit to industrial sector worsened the small players in the market. In other words, our banks were more comfortable funding the fiscal deficit rather than private commercial activity. Gratuitous perversity in Indian banks is observed and that is coined as the Lazy banking.

The era of Lazy banking can also be attributed to the Industrial recession that created a fever amongst the Bankers about CBI raids for wrong credits.

The worst days of lazy banking are now over. Over the past, because of the economic recovery, credit to industry has been growing considerably. The focus has shifted back to loan growth. Most of the demand till now has come from working capital. And the bond market is no longer that attractive - bond prices have plunged and bond issuance is bound to suffer as the government cuts its fiscal deficit.

Yet, the recent episode of lazy banking throws up many hard questions. These questions should become part of the current debate on banking reform, which is hopelessly stuck on whether foreign capital should be allowed into the Indian banking industry. The good health of Indian banks is worthy of celebration. But what if this health has been achieved by not lending to the economy?

Bank nationalisation has been demonised for a number of valid reasons. Politicians used the banking system to dish out loans to favoured interest groups, and directly contributed to the huge bad loan problem of later decades. Capital was misallocated. But what is not adequately appreciated is the fact that the policy of bank nationalisation was actually a success in terms of its key goal - spreading the banking habit in the country and providing credit to small companies and farmers.

The first round of banking reforms in 1992 was partly responsible for the credit squeeze of the past five years, especially because of capital adequacy norms that made lending to the government more attractive than before. While Indian banks will have to deal with many issues ranging from capital adequacy to globalisation - they will also have to ensure that small companies and farmers, who form the bedrock of the Indian economy in terms of output, employment and exports, are not starved of credit. And this lending should be done in a way that earns profits.

Fortune favours the quick adapter. The year 2006-07 was challenging in several ways. Treasury income, their mainstay in the earlier part of the decade, went down appreciably as bond prices sagged and yields rose under intensifying demand for money, even as the government put far less paper in the market. With ‘lazy banking’ options closed, commercial lending was all the rage, but here too, there were the RBI-delivered shocks—higher risk weightages in creamy sectors like housing loans, apart from two CRR hikes in rough conjunction with repo and reverse repo rate hikes aimed at vacuuming liquidity and preventing froth.

But with the economy in boom, banks were not short of business—not even depositors, it turns out, though this took a tax-sop nudge from the finance ministry. The funds crunch scare did not quite materialise.

The Reserve Bank has also been periodically issuing guidelines on public grievance redressal mechanism in banks, including constitution of customer service centers. Based on the recommendations of a Committee on Procedures and Performance Audit of Public Services for ensuring improvements in quality of service rendered, banks were advised to constitute a Customer Service Committee of the Board. In the Reserve Bank, the Customer Service Department has recently been constituted to, inter alia, serve as the interface between customers and banks.
On a broader plane, the Reserve Bank has been adopting a two-pronged strategy to generate greater awareness and expand the reach of banking services – which can be termed as empowerment and protection. As regards the former, financial inclusion is the first stage of the process. This is strengthened by inculcating awareness among the masses through financial education. Concurrently, an advisory mechanism in the form of credit counseling is being encouraged to help distressed borrowers and bring them within the fold of formal finance. As regards protection, a Banking Codes and Standards Board of India has been established recently to ensure a comprehensive code of conduct for minimum standards of banking services to be offered by banks. The revised Banking Ombudsman Scheme has been put in place to redress deficiencies in customer service by banks.

The economy is presently in a phase of rapidly rising incomes, rural and urban, arising from an expansion of extant economic activities as well as the creation of new activities. Corporate profitability has exhibited sustainable trends and consumer incomes are increasing rapidly, riding on the growth momentum. All of these developments suggest that the demand for financial services, both for savings as well as production purposes, will be greater than has been the case in the past, and there will be many new entrants in need of financial services who have not hitherto been served. At present our financial depth is much lower than that of other Asian countries, though it has picked up in the recent past. While there is evidence of an increase in financial deepening, particularly during the present decade, the increase in the breadth and coverage of formal finance has been less than adequate. Deepening the financial system and widening its reach is crucial for both accelerating growth and for equitable distribution, given the present stage of development of our country.

There has been a burst of entrepreneurship across the country, spanning rural, semi-urban and urban areas. This has to be nurtured and financed. It is only through growth of enterprises across all sizes that competition will be fostered. A small entrepreneur today will be a big entrepreneur tomorrow, and might well become a multinational enterprise eventually if given the comfort of financial support. But we also have to understand that there will be failures as well as successes. Banks will therefore have to tone up their risk assessment and risk management capacities, and provide for these failures as part of their risk management. Despite the risk, financing of first time entrepreneurs is a must for financial inclusion and growth.

The Parliament passed the Credit Information Bureau Act last year and the guidelines for its implementation will be released shortly. This should enable, over time, the availability of credit histories of both individuals and small businesses, which will help significantly in reducing transactions and information costs for banks. It will also help in spreading the credit culture among borrowers. It should help banks greatly in assessing and managing risk at low cost.

As poverty levels decline and households have greater levels of discretionary incomes, they will be first time financial savers. They will, therefore, need to have easy access to formal financial systems to get into the banking habit. Banks will need to innovate and devise newer methods of including such customers into their fold. The importance of 'no-frills' account and expanding the range of identity documents that is acceptable to open an account without sacrificing objectivity of the process in this milieu can never be over-emphasised. Banks will need to go to their customers, rather than the other way around.
The micro-credit and the Self Help Group movements are in their infancy but are gathering force. More innovation in the form of business facilitators and correspondents will be needed for banks to increase their outreach for banks to ensure financial inclusion. New entrants to the banking system need households at their doorstep.

To conclude, with increasing liberalisation and higher economic growth, the role of banking sector is poised to increase in the financing pattern of economic activities within the country. To meet the growing credit demand, the banks need to mobilise resources from a wider deposit base and extend credit to activities hitherto not financed by banks. The trend of increasing commercialisation of agriculture and rural activities should generate greener pastures, and banks should examine the benefits of increasing penetration therein. Financial inclusion will strengthen financial deepening and provide resources to the banks to expand credit delivery.