“If a banker gives you a loan and it
goes bad he will stand to lose his pension. If he does not give a
loan he can become the Chairman” This was my concept of the banking
sector, especially related to the MSME sector. This concept emerged
out of my experiences in trying to get a loan for the new unit we
were planning to set up.
Generally you need an introduction and
that defines your choice. Rarely will an entrepreneur have the
liberty to make a choice based on the banks fundamentals. We had our
fair share of applying in vain and wasting time. The process is
“manager” dependent and therein lies the rub. They can generate
101 legitimate excuses, the one that comes home to roost is they are
over exposed to a particular sector. If that was the case how come
individual banks had such huge exposures to the barge and truck
business?
We decided to approached a top
nationalised bank without any reference. The Manager here was keen to
do business but he needed collateral security in the form of FD’s.
Our plea that such a request is absurd because who would keep FD’s
and borrows at double the cost against them. Even if an entrepreneur
was naive enough to do so, if something went wrong, the bank would
encash the FD’s right. So what is the bank doing lending at such a
high rate when they have no risk.
The Chairman was visiting Goa and he
made a statement that there is money but there are no takers. The
editorials went to town stating that even if there is money one has
to have guts to borrow and do business and Goans lack what it takes.
Our objection to such a statement in the media, shook the top brass
of SBI and a meeting was fixed. The outcome, there is no such need to
give FD’s as security to borrow. So why did the manager make the
demand, simple, he wanted to be chairman one day.
We spent 15 years banking with them.
Once in, it was a different ball game especially if the company
performs. We learned one big lesson, without the support of your
banker the Company cannot grow. Therefore honesty and openness must
be the bedrock of this relationship. After all if the Manager is
going to support you he must know the correct picture. We also
learned to structure the balance sheets so that the correct picture
is presented. Eg: interest on loans from promoters should not be put
under short term loans, but correctly under long term sources, but
more because the ratios get affected and bankers go by ratios.
When we went in for an expansion we
fell for the lesser interest sales pitch of top private bank and are
we regretting this decision. In the five years we are associated with
them, it is clear that at the level where bank and customer interact
there is no expertise, simply postmen in ties. The money saved by the
lower interest rate already snatched away under the guise of charges.
The personal touch is absent as everything is system and controlled
by an anonymous central operations team, somewhere. Cutting edge
technology surely does not make up for a face to face discussion to
sought the issue.
We have now embarked on a mission to
switch back to a public sector bank, with our track record of no
default over 20 years one would assume the banks would be lining up
to get our custom, that is far from the truth, for MSME companies
there are takeover norms. Kingfisher type companies will get cores
despite defaults but for an MSME it is an uphill task. The lesson
here is get into a good public sector bank at the start, and stick
with them. They do take time to get comfortable with your business
but once they do, both your company and the bank will benefit.
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