Central Bank of India – a Pioneer
With all of you at home, let’s dwell into some Parsi history of an iconic banker…..
HDFC Bank is a giant in its own sense. Financial companies look up to it & Mr. Puri’s management style. But we all know nothing endures for ever. Here’s a story of a equally prominent Indian bank of its time that is still functional but hardly anyone cares today…..
This bank was registered in December 1911 with a paid up capital of a meagre 20 lakh. It was founded by a Parsi who started his banking career with Bank of India as an accountant. In those days, even if BOI was Indian sponsored, key managerial positions were all held by Europeans.
At Bank of India, our Parsi bawa reported to a guy called H P Stringfellow, a European ofcourse. He drew a salary of Rs. 5000/- a month while our Parsi bawa was paid Rs. 200 a month.
Not only were there huge pay disparities and humiliations, Europeans dominated banks were partial when it came to giving out credit to Indian entrepreneurs and businesses.
Our Parsi bawa didn’t like this. He wanted an Indian Bank managed by Indians. It was not easy. Early 1900s also saw rise of Swadeshi movement and after initial hesitation it was applied to the world of banking as well.
So one morning the young Parsi boy told his boss ( H P Stringfellow) that he has had it enough and that he will set up his own bank. His boss thought of his idea as a ‘huge joke’ but soon realised he was serious. Mr. Stringfellow asked our Parsi bawa to reconsider his decision.
But the young boy was determined and said to his boss – ‘Sir, I have made up my mind. I resign from the bank’s service. One day my bank will be bigger than yours’. Here’s the first connection of this Bank with HDFC bank
Thakoredas Parekh who worked with our Parsi bawa at BOI left along with him & assisted him in setting up his bank by joining as Superintendent of Current Account and Bills Department. It’s noteworthy that Thakoredas Parekh is Deepak Parekh’s grandfather.
But initial few years post starting operations were not easy. 87 banks failed between 1913-1917, starting before WW1 and accentuated by it. Notice the main cause of failure. 100 years later, anything has hardly changed when it comes to Bank failures.
Early on post the bank started its operations, there were multiple runs on our Parsi bawa’s bank too. Just 2 year in to operations, there was a major run on the bank. Directors of the bank pledged titles of their personal properties to pay to depositors.
Before 1923, Parsi bawa’s bank saw through another couple of bank runs. Each time coming out stronger purely on commitment and sincerity of its management. Then something extraordinary happened in 1923.
Not many know this, but Tata’s once owned and operated a bank too – for a grand total of 6 years. They had once set up Tata Industrial Bank (TIB) during boom of WW1 (1917). TIB had paid up capital of Rs. 2.3 cr and deposits totalling to ~6 cr. These were big numbers back then.
Post WW1, the TIB started to get into trouble. Once the boom of WW1 ended TIB’s industrial investments rapidly depreciated. TIB had also spent 66 Lakh on magnificent structures in Bombay & Calcutta. House of Tatas was also passing through a lean phase in early 1920s.
Imagine what history would have looked like had a bank from Tatas failed. Although a competitor bank, our Parsi bawa didn’t want TIB to fail. TIB failing would have put shutters on operational success of lot of other Indian sponsored banks.
That’s when Parsi bawa put up a bold scheme. Although less than one fifth in size, he wanted to Amalgamate TIB with his bank. In today’s parlance, purely by Balance sheet size, it’s like amalgamating SBI with HDFC Bank.
A few boardroom dramas later, TIB was amalgamated with our Parsi bawas bank in July 1923. Post amalgamation, the capital and reserves went 4x immediately. The staff of TIB was mostly European who slowly were replaced with Indians.
With this and some truly fantastic innovation mostly mastered by our Parsi bawa, the bank went on to become a force to reckon with in Indian banking industry. There were some firsts which came out from this bank. For example this bank was the first to launch a Safe Deposit Vault.
It was also first in India to introduce HSS passbooks and system of withdrawals by cheques in Savings Account. In 1924 it became the first to employ women assistants to serve lady customers and even maintained a separate department for them.
Infact India’s first woman commerce graduate Yasmin Surveyor was the first to join the women department at the bank. She got her commerce degree from Sydenham College.
Your Wealth RM selling you estate planning? Our Parsi bawa’s bank did it back in 1929. First one to start in India. Your banker sold you a savings account sighting free life insurance protection? Parsi bawa’s bank offered free life insurance if one maintained avg. bal. of Rs.10.
Parsi bawa also launched ‘Home Savings Safe’ account. When was the last time your banker asked you to save? These days it’s only about spending – CC, PL, Auto loans. At one point one in 15 Bombayite had an account with his bank.
By the time our Parsi bawa’s bank turned 25 years old, it was by far the largest bank in India with one third market share in deposits. To compare HDFC bank is also 25 year old and its market share is less than 10%. What are the industry first innovations from HDFC Bank?
You might say, ah HDFC bank today competes with SBI. Our Parsi bawa also had competition with SBI’s predecessor Imperial Bank which was must stronger than what SBI is today. Imperial Bank was not only a commercial bank then,it performed duties that RBI performs today
So which bank am I talking about? Our Parsi bawa’s name was Sir Sorabji N Pochkhanawala & his bank’s name is Central Bank of India. Sir Sorabji was only 30 year old when he founded Central Bank. Today Central bank’s Mcap is 6500 cr against 4.2 lakh crore of HDFC bank!
Proudly shared by Jehangir Bisney
Example of a true entrepreneur the likes of whom should motivate us. Being my grandfather’s brother here are a few interesting facts not in the article.He joined Elphinstone college but dropped out to work with Chartered Bank to support his family. He was a fast on the job learner and decided to self school to take and pass and obtain the British Banking certificate. He then started training young Britishers who went on to become bosses. He got fed up with the discrimination and decided to open a bank owned by & operated by Indians. HE WAS ONLY 27. When he went home and told his family, all except his young wife Sakerbai, were upset at his stupidity and did not talk to him for 6 months. The rest as described above is history. The English banks tried their hardest to sink his bank but he prevailed and he was recognized and Knighted in 1934. He passed away in 1937 at the age of only 54 partly due to diabetes and his love for food. Hopefully it will motivate someone as it did me. If you can dream it you can do it.