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Speech by Mr V Leeladhar, Deputy Governor of the Reserve Bank of India, on the occasion of the
centenary celebrations of the Corporation Bank, Bangalore, 12 March 2005.
* * *
It gives me great pleasure to be in your midst today. A hundred years is, indeed, a landmark event in
the history of an institution and as Corporation Bank celebrates its centenary, it joins the rank of the
‘venerables’. The establishment of the Corporation Bank with its humble beginnings in 1906 was
during an eventful period in India’s economic history. It was a brave new era which saw a flurry of
activity when a host of what were then termed ‘native’ banks were set up in India, spurred, in no small
measure, by the forces of a resurgent nationalism and the yearning for self determination. These
forces, later coalesced into the Swadeshi Movement, helped draw out the latent entrepreneual talent
of the time in the field of banking to set up banks oriented towards the indigenous communities which
they sought to serve.
With the onset of liberalization, banks in India are under pressure to change the ways in which they do
business. They now face an increasingly competitive environment not only from banks but also from
non-bank financial institutions. Explosive growth in IT has changed the way individuals interact with
banks and the way banks respond. In the changed scenario, success will depend on the ability of
banks to leverage the human potential and capabilities. This speech is an attempt to reflect on the
new challenges facing banks in the management of human resources.
The period 1904 to 1913 saw a bank being set up virtually every year – prominent amongst these
were the Bank of Burma established in 1904, the Bank of India, the Corporation Bank and the Canara
Bank in 1906, the Indian Bank in 1907, the Bank of Baroda and the Punjab and Sindh Bank in 1908,
the Central Bank of India in 1911 and the Bank of Mysore in 1913. The Corporation Bank has come a
long way since the heady days of the early 20th century. Today, we can proudly state that it has
fulfilled the vision of its founders if ‘not in full measure, very substantially’. It has not only survived a
hundred turbulent years, but is today one of the more agile PSB players in the market. This has been
possible in no small measure by the Bank’s ability to manage and utilize its talent and potential. And
this brings us to the theme of my deliberation today - managing talent in banks.
In the run up to the hundred years, banks and banking have changed substantially. As we view
matters in retrospect, we see two landmark events which constituted strategic inflexion points in the
history of Indian Banking in the 20th century – one being the nationalization of banks in 1969-70 and
the other, the financial sector reforms that commenced in the early 1990s. Nationalisation generated
forces that took banking from an elite class to the masses. It led to the establishment of a very
substantial infrastructure across the geographical expanse of the sub-continent and more importantly
to the financial empowerment large sections of society which substantially changed the Indian
socio-economic landscape. The second inflexion point in banking was the financial sector reforms
initiative that was launched in the early 1990s. These reforms heralded a dramatic shift in the way
banks functioned and operated in India. The changed environment and the internal compulsions
arising from greater competition and the need to improve their market share / profitability gave rise to
the quest for greater efficiency and the need to reposition themselves given the realities of the
environment and their internal strengths and weaknesses.
A response to competition and the need to shape up has been the quest for efficiency. This quest, like
the task of Sisyphus, has been never ending. Every target met, every cost reduction constitutes the
new threshold limit to be crossed in the next quarter or half year. Every achievement gives rise to ever
greater expectations of greater efficiency and cost reductions and greater output – and this is any
CEO’s bane. Banking essentially consists of intermediating and managing risk and providing banking
services. In the quest for efficiency what distinguishes one player from another is its human capital. As
former RBI Governor, Dr. Bimal Jalan had pointed out “capital and technology are replicable but not
human capital which needs to be viewed as a valuable resource for the achievement of competitive
advantage.”
Where an institution is, in its time trajectory, fundamentally dependent not just on the sum total of its
individual human capital, but on how effectively it draws out the best from its talent bank at any point of
time, through effective placements, performance appraisal, rewards and recognition mechanism. How
the trajectory changes is dependent on how it builds capacities, through training and recruitment. What