Several Founders, Co-Founders, CXO Bankers, CXO Fintech professional & people who participated in the ePanel discussions:

  • Dr. Abhishek Agrawal, Chief Regional Officer, Accion
  • Ms. Mithila Balse, KYC Coordinator APAC for Financial Institutions
  • Mr. Sugata Dutta, International Training Assessor & Banking Domain expert for E- Learning Platforms
  • Mr. Anand V, Vice President & Product Head- NRI Business, Kotak Mahindra Bank
  • Mr. P B Prakash, Head-Financial Institutions Group, IndusInd Bank
  • Mr. Roopesh Chandran, Director, Business Development, Visa Inc
  • Mr. Abhishek Arun, Chief Operating Officer, Paytm Payments Bank
  • Mr. Rakesh Watal, Head Liability Operations Western Region, HDFC Bank
  • Mr. Sugata Ghosh, Associate Editor at The Economic Times, BCCL
  • Mr. Raj K Prasad, Sr. VP & Head- Trade & Forex Products & Services at Axis Bank
  • Ms. Kaunain Esmile, Vice President- Country Lead Customer experience, DBS Bank
  • Mr. Shashank Chowdhury, Former Managing Director -India, Infinite Zero
  • Mr. Shirsha Ghosh, Co-Founder Torit Innovations
  • Mr. Arun Tanksali, Co-founder & CTO, Nearex
  • Mr. Abhishek Mody, former Associate Director-Payment & Digital Initiatives, IDFC FIRST Bank
  • Mr. Vikas R Panditrao, Co-Founder, Forum of Industry and Academic Knowledge Sharing (FIAKS)
  • Many other CEO/CXO Bankers & Fintech professionals on FIAKS Forum requested to remain anonymous

Well, we got to witness salary cuts to mass unemployment to furloughs. The economy went down the slope. Now check this out

The first question that comes up is will  Bank become an NPA if the owners don’t agree with the rent discount?

Well, this is quite debatable and several members had diverging viewpoints

Let’s check out the views from one side of the table;

  • These are only strong-arm bullying unethical practices. What if the owners get together and take a united stand. If the bank has to relocate several branches, the cost of relocation will exceed the savings in rent by taking the new premises.
  • If this is true, expect other banks to follow suit & diversify this ridiculous behavior to other areas like supply/procurement chain – imagine if they asked their daily vendors/partners to renegotiate agreed/signed rates – small and medium businesses will be impacted. Especially that business who live and work by credit – buy now and get paid later (45/60 days)
  • A member says, “I find it highly unethical, while Bank has continued to thrive, including their share price; it is ridiculous that a bank like them are expecting a reduction in rent. Would the bank have increased the rent, if the bank makes a profit more than expected? It is a strong-arm tactic from the bank. I have in particular never been a fan of such bank practices, while they come across as ethical banks, they follow a very strong arm and risk-averse practice.”

Does this seem to be fair?

  • It is not just Bank or just landlords. Many other banks including large PSU banks have held several rounds of discussions with all kinds of vendors for a substantial reduction in commercials. Even for onsite T&M resources. Since April, it has become a standard trend.
  • The measures announced by Government for pandemic did not, till now, adversely impact any earnings of banks. Rather, their income out of transactional services would have increased. Interest income remained unaffected as it seems.
  • Asking for a reduction in commercials for vendors and landlords is blatantly unfair.
  • The Risk Management Framework of these banks failed miserably in factoring risks arising out of pandemics. The cost of failure, if there is any, is being attempted to be passed on to third parties who were not the cause of the risk. such banks should give a 20% rebate to all charges and interest amounts.

Now let’s see the other perception;

  • Well, this is certainly debatable. Many organizations have reduced salaries by a certain percentage either across or at certain levels. Many organizations have not gone for any increase on account of COVID 19. Even individual/corporate tenants are negotiating (in some cases arm twisting) for a reduction in rent. If a bank decides to reduce the cost by negotiating the rent which is a major cost, it should not be seen negatively.
  • It is a well-thought plan to bring down the rental cost. They will be now getting properties at lower prices. They are giving the landlords a chance to rebook’ as their agreement must be having an exit clause. It is not a case of arm twisting, they will also look at ATM premises shortly.
  • Of course, the bank needs to cut costs and rent is a big outgo. Cutting rent will certainly shore up the profits for the shareholders and promoters. That’s where the maturity of an organization comes to test. Whether to be a good corporate citizen or not. It’s the mindset that separates good organizations from great organizations.
  • A member opines, “In my view, there is nothing wrong in aligning costs with market reality. Moreover,  the bank has been known to manage its cost well and the current step is also towards ensuring effective management of the future NPA stress that will start hitting balance sheets. Honestly, if another bank today offers a lower rate on my current loan, won’t I switch? I don’t debate that I am contracted at a certain rate for the next 10 years.”
  • What if property prices were going up? Will the landlord not ask for a hike or otherwise ask a tenant to vacate. It shows to go how good at cost management the entity is. There is nothing wrong with what they are trying. It’s opening a negotiation with the lessor to relook at the arrangement keeping market conditions in mind. Just because it’s a profitable entity doesn’t mean it should be ambivalent to the market reality. Demand and supply will determine the price that they will ultimately settle at.
  • Again another FIAKS intellectual states, “I am a big fan of this bank and they are extremely cost-conscious. They know how to do business and at the same time protect depositors’ money. What’s wrong in asking for a rent reduction. Recently Kotak bank announced a salary cut of  10% for a certain level. [1] Did they take consent from all employees? The approach was to take it or leave. Entrepreneurship success is all about handling are these ill-treatments that we all are used to it. Asking random reductions, threatening termination, not renewing, taking free services/trial run is BAU for all entrepreneurs whether it’s a vegetable vendor or founder of large fintech. If you want a bank to run profitable one needs to cut cost and HDFC is smart to understand that rental is a big expense rather than cutting down salary.”
  • Even for employees, people are not getting an appraisal for good work done last year- not fair. But when is life fair!

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