The savings habit of Indians in risk-free investment model is a product of the family system. We need to promote, sustain and protect this relationship-based model, which is unique to India, observed Corporate Advisor and Commentator on Economic and Political Affairs S Gurumurthy.

Appealing to bankmen, who had gathered at the Codissia Trade Fair Complex here to attend the Silver Jubilee General Body Meeting of State Bank of India Officers’ Association – Chennai Circle (SBIOA (CC)) to do a research on the economic, saving and investment behaviour of the people and their families for a better understanding of our financial system, he said ‘lack of generation and distribution of knowledge is affecting the image of banks, and the ones in the public sector in particular".

"A major understanding exercise and reorientation is needed for those that represent the banking system," he said and stressed the need for rebranding the image of public sector banks based on relationship.

Urging the audience against aping the western model, Gurumurthy in his hour-long address captured the role of banks in the Indian financial system over the last 30 years.

He said "the total amount of foreign investments in the corporate sector is $477 billion by way of foreign direct investment, FIIs that have come into the stock market, foreign borrowing and bank advances. Apart from this, the banking sector has advanced around Rs 20 lakh crore to the corporate sector. The Corporate sector has thus got around Rs 48 lakh crore between 1991 and 2014."

"What have they done with this money? If you see where this money has been invested and what it has done to employment growth and GDP, you will have a fair idea," he said and continued "the corporate sector’s share in India’s GDP in 1991 was 12 per cent, while the share of agriculture was 27 per cent, government - 22 per cent and the rest from the non-corporate sector. In 2014, the share of the corporate sector rose to 15 (just 3 per cent achievement during this period), while the share of agriculture to India’s GDP slipped to 15, government – at more or less the same level and the non-corporate sector to 45 per cent."

"According to the Economic Survey, the entire corporate sector (both public and private) has, during this period added only 2.2 million heads; while employment in the public sector dropped by 1.5 million heads private sector added 3.7 million."

Urging bankers to study the GDP to deposit ratio, he said "our financial system is driven by moderation and not hike or excitement. In 1991, when the rate of interest on a 5-year deposit was 13 per cent, people opted to park their money in banks. The rate fell to 5.5 per cent in 2000 and is now hovering around 8.5 to 9 per cent. Despite the variation in interest rates, the savings model has not varied at all and this savings habit has strengthened our banking system."

""The savings deposit in the banks is close to Rs 80 lakh cr of which 80 per cent is with PSBs, 11 per cent with the private sector and 2 per cent in foreign banks. The Indian financial system is largely bank driven and even more strongly PSB driven. Unfortunately, not many are aware of this," he said citing the contribution of banks in the financial inclusion schemes.

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