The man who took banking to the masses

Winston Churchill once said, “We shape our buildings; thereafter they shape us”.

The town of Manipal is a testimony to how a small place can achieve greatness due to a few people and, in turn, shape the futures of thousands of men and women.

Nestled between the Sahyadri hills and the Arabian Sea, Manipal today perhaps has many times more than its share of top-class institutions. Tonse Ananth Pai (January 17, 1922 – May 29, 1981) was one of the few men who catapulted a small village into a model for the world to follow.

In a career spanning 38 years, Ananth Pai’s contributions to nation-building took many forms. As a politician, he held several Union Ministry portfolios that included the Railways during one of its tumultuous periods in the early 1970s. Earlier, as the chairman of the Life Insurance Corporation, he brought in significant changes to its functioning. He founded the TA Pai Management Institute, which went on to become one of the top business schools in the country. However, his most remarkable contributions came early in his career, when he was with Syndicate Bank.

Ananth Pai joined Syndicate Bank as a Deputy Manager in 1943 immediately after graduating from Sydenham College of Commerce and Economics in the then Bombay. The years that followed were both exciting and challenging for rural banking. When founded in 1925 by his father Upendra Pai, TMA Pai, and VS Kudva, Syndicate Bank was the first bank with a rural HQ. It was known for encouraging small depositors through initiatives such as the pigmy deposit scheme.

Two socio-economic events affected the banking industry in the 1940s. First was World War II, which saw large-scale mobilisation of Indian soldiers, increasing the incomes of thousands of rural households.

The second was the transition of a feudalistic society ruled by the British into a democratic nation where every individual felt free and empowered. It needed someone with grassroots understanding, business acumen, and compassion for the poor and the common people to respond to the new economic landscape. Ananth Pai was precisely that person.

Under Ananth Pai’s stewardship, Syndicate Bank embarked on ground-breaking rural expansion programmes with innovative features. Many rural branches were opened all over South Canara district with the active participation of village representatives. Many branches were, in fact, run from the homes of these representatives, who were compensated with rents. Much of the transactions were carried out in local language, in which the many forms were printed.

Focus on small customers

The focus was always on the small customer. The largest deposits and biggest loans were in the range of a few thousand rupees in most branches. The practice of lending very small amounts, such as ₹25, was considered bad practice in those days by the Reserve Bank of India.

In his book The Innovative Banker , MV Kamath has narrated an incident when Ananth Pai had just taken over as the Managing Director of Syndicate Bank. During the customary meeting, an RBI Deputy Governor asked him why he wanted to lend such small amounts now that the bank had grown in size. To which he got this response: “We have grown big by lending ₹25 and ₹50!”.

While service to the community was a common thread that ran through all the operations of Syndicate Bank, the business objectives were never out of sight. Ananth Pai and his predecessors had realised the responsibility of, and the value in, providing service to a large number of small customers long before terms like “fortune at the bottom of the pyramid” and “microfinancing” had emerged. Ananth Pai also saw great value in women as account-holders.

This belief stemmed from his grassroots level interactions with villagers. He had noted that a large number of women who traded in vegetables and fish did not have the means to save and ended up losing their hard-earned money to unscrupulous men, often their own husbands. He ran a campaign and the bank ended up getting thousands of savings accounts of these women.

His respect for women as stakeholders in the country’s development also showed up in another area — employment. Immediately after his taking over as the Managing Director in 1962, Syndicate Bank created history by opening an all-women branch in Bengaluru (Sheshadripuram). Many more such branches were to follow.

Ananth Pai’s view was that banks should not be passive spectators in a country’s economic development. He felt that banks must participate in the so-called risky sectors such as agriculture and invest in its potential rather than stay away. He set up an Agricultural Finance Department and started financing irrigation pumpsets, which turned out to be a profitable venture for Syndicate Bank.

The objective in this and many other initiatives was always simple: Structure the loan in such a way that farmers would actually repay. He also had great belief in the cooperative society movement and helped set up and run agricultural and milk cooperative societies.

Helming LIC

Syndicate Bank, along with 13 other banks, was nationalised in 1969, ostensibly to ensure that banks serve society. Ananth Pai was not convinced that it was a good move. It would be interesting to examine if the public sector banks today fulfil their social role better than banks like Syndicate Bank did when they were self-financed. After continuing for a brief period as the custodian, Ananth Pai was appointed chairman of LIC in 1970.

Under his leadership, LIC became a progressive organisation and increased its business. True to his form, he pioneered the idea that insurance premiums can be used for nation-building activities such as lending to the lower income groups for building houses and for civic projects. Pleased with the way he turned around LIC, the government conferred on him the Padma Bhushan in 1972.

Today, as we watch nationalised banks struggle in their efforts to perform their social function, and the disdain with which the large banks treat small and rural customers, we can only marvel at the wisdom and sagacity of men like Ananth Pai. For such men, there is no conflict or trade-off between serving society and running a business.

The writer is Associate Dean (Academics), Professor and Chair, Information Systems and Technology,TAPMI

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