core banking in India ....... kidding me? Non-home branch customers discriminated against by big public sector banks

Core banking in India seems to be becoming a joke. There is open and active discrimination against non-home branch holders now.

I realised this during my recent visit to SBI (Mehrauli Gurgaon branch). Until then i was not even aware of the term "non-home" branch. As can be seen in the picture below this term is used by SBI to differentiate its own account holders from other branches. 

And the differentiation is not just a formality. It signifies marked difference in service to non-home account holders. So while others form queues inside the main building under air-conditioned environment, the non-home guys have been pushed to a single window outside the office where people stand in heat under a tin/asbestos/cement shed.

If a nationalised bank like SBI behaves in such a manner then its a sheer hypocrisy to raise fingers at the private and/or foreign banks for small mistakes. This particular SBI branch has so much land at its disposal that many more customers can be accomodated. However, this is also an example of government neglect and apathy. Interestingly, most of the non-home account holders forming the queue appeared to be in the low-income category. At a time when SBI proclaims that it is spearheading financial inclusion such a treatment meted out to the poor and non-home account holders is not justified. 

Some web links even suggest that non-home customers are charged money for passbook updation. While i cannot verify the truth in this i would not be very surprised. I also gather that SBI alone is not indulging in such discrimination, PNB also has resorted to this.

The banking regulator should look into these matters and tighten up the banks as India graduates to being a developed economy.

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As a follow up to the above, i visited another branch of SBI today to figure out if the situation is a norm. I visited the home branch this time in sector 63 Gurgaon and so was allowed to stand in the queue inside the building.

While my friend maintained his position in the queue i caught up with the branch manager Rajinder Singh (apologies if spelling is incorrect.) Seated in a very approachable location Mr. Singh was quite friendly but defensive.  I asked him if RBI directives regarding core banking have changed as a consequence of which the SBI branches are resorting to the "non-home" discrimination. He said that's not the case but if they entertain so many non-home customers their own customers would ditch them. He added that his branch, however, has taken care to make the visit for non-home customers much more comfortable. He has apparently spent 30k to provide a shed to them and install a fan there.

I thought i would take a look. A small lane outside the main door took me to this single window seen in the picture above. Twenty customers were present there and the shed couldn't hold more than that.

However, relative improvement in the broader inconvenience is a moot point. The discrimination is very much there and almost a norm. I am not sure if RBI is aware of this but i hope it takes notice and ensures that customers get the same treatment irrespective of what branch they come from.

I am sure the problem of tackling larger numbers has other feasible alternatives.

Personalized Inflation

Inflation is an issue that i frequently encounter while studying the macros of a number of economies. Almost everybody - from a layman to a policy maker to a corporate body - is interested in this number. Critical investment decisions worth billions of dollars are to some extent dependent on this number.

What however intrigues me is how come inflation numbers published by central banks or other institutions for the whole economy are relevant for a micro unit (household, or business unit) of an economy?

I understand that these broad numbers are very relevant for policy makers wanting to understand the direction in which the economy is going and what tightening or loosening it needs. I also understand that each country defines a number of inflation categories (consumer, producer, housing, labor etc.) to show the broad price trends in each of these categories.

My contention however is that there is need for a "personalized inflation" number  for every decision maker. This number would be based on the exact consumption pattern of the economic unit under consideration. And the reason this needs to be considered is that broad inflation numbers ignore the concept and possibility of "substitutability" in consumption.

Let me illustrate this with some examples. At a household level when the price of a particular food item rises one either substitutes it or changes the consumption habits to spend more on that food item. So if ladyfinger becomes expensive you consume more of say pumpkin. If the price of onion (relatively inelastic), however, rises one might have to reduce the number of times one goes to the cinema.

The level of well-being in such times of inflation depends on substitutability options. The poor man has limited substitutability options and therefore he is impacted more but even this limited substitutability in most cases is good enough for survival.

At the level of business units again the consumption baskets and patterns of each unit is different and the broad inflation measure doesn't readily apply. The inflation for a distributor would be different when compared to the inflation for a manufacturer. The inflation in pharma industry would be different from the inflation in the technology industry or the construction industry. At the same time the options of substitution would be quite different for each player.

If the data collection bodies in each country could therefore provide a dynamic inflation calculator to the economic units (something on the lines of say a loan EMI calculator) it would be more useful. In such a calculator the economic unit would pick its own unique consumption basket and get the results. It could also allow for better decision making by allowing different permutations and combinations of consumption items.

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January 18, 2012

I realize that my thought of 'personalized inflation' is not that unique actually. UK's ONS in fact provides a link that allows a family to calculate personalized inflation. Once you feed in your expenditures across various categories the tool calculates and compares your inflation to the national inflation as shown in the figure below.