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Narayana Swamy, Manager of the Malgudi branch of Janta Bank, arrived at his office as usual at 10.00 a.m. and found a telegram on his table. He was worried after reading it. It read: "Arrange to disburse at least 100 loans under the DRI scheme on Gandhi Jayanti Day." (The DRI scheme stands for the Differential Rate of Interest scheme.) Gandhi Jayanti was hardly 10 days away from that day and he felt like informing the Divisional Office that it was not possible to do this work with his existing staff. At the same time he was apprehensive that the Divisional Manager might misunderstand him. He was not averse to lending to weaker sections of society. But he believed that procedures have their importance and have to be complied with. Granting 100 loans involved a lot of work like identification, appraisal, documentation, post sanction scrutiny, etc. Besides, the safety of the banks funds was paramount to him. However, he discussed the matter with the accountant who reminded him that Popular Lungi Company, one of the valued clients of the branch, had approached them sometime back with a proposal to sanction loans to poor weavers. He thought it was a good idea to contact Mr. Ponnuswamy Chetty, one of the partners of the firm. Differential rate of interest scheme The scheme was evolved with a view to provide credit to the poorest among the poor for acquiring fixed assets and for working capital purpose up to Rs. 5,000 and Rs. 1,500 respectively. The rate of interest charged on such loans was 4 per cent per annum. All those whose annual family income did not exceed Rs. 2,000 in rural areas and Rs. 3,000 in other areas were eligible under the scheme. Under the government directive, the Janta Bank, a nationalized bank, was required to reach a target of 1 per cent of the total advances outstanding as at the previous year as advances under the DRI scheme. In order to achieve this objective, the bank had delegated sanctioning powers to all branch managers who were required to send sanction advices to the divisional office within a fortnight. The Popular Lungi Company, with an annual turnover of Rs. 40 lakh, exported lungis mainly to the Middle East and African countries. It enjoyed Rs. 10 lakh foreign bills purchase limit with the Malgudi branch. It supplied yarn to hundreds of weavers living in the villages that in turn manufactured lungis and supplied them to the company. The company paid Rs. 3 to Rs. 5 per day as wages to the weavers. The company was facing acute shortage of working capital funds and was finding it difficult to supply the yarn while the demand for the products was ever increasing. It, however, had very bright future prospects. There was also pressure from the weavers to increase their wages. Disbursal under DRI Having come to know about the DRI scheme through the wide publicity given to it by the banks, Mr. Ponnuswamy Chetty approached the bank to finance the weavers for purchase of yarn under the scheme. He was prepared to guarantee the loans and ensure prompt repayment of monthly installments by deducting from the payments the company would be making to the Dr Vijay Sharma, Asst Professor, Department of Management, Government Engineering College, Bikaner-334001 Vikalpa Volume-10 No.02 April-June 85

weavers He also offered help to the bank in identifying the beneficiaries obtaining application forms, and any other help the bank might need for completing the formalities. An understanding was reached between Mr. Ponnuswamy Chetty and the branch manager for disbursal of loans. As per the agreement, the company was to process all the papers/documents on behalf of the weavers get their signatures, etc., and pass them on to the bank. Mr. Ponnuswamy also told the branch manager that he would procure stocks of yarn immediately and keep them to release from time to time as per the requirements of the company. He informed the branch manager that he did not propose to give all the stocks to weavers because whenever weavers got surplus stocks of yarn they sold them off in the market and used the cash available for their consumption needs. When payment to a weaver became due the company would deduct the installment .amount from it and remit the balance to the bank. Mr. Narayana Swamy, thus, completed the task of disbursing 100 loans of Rs. 1,000 each under the DRI scheme on Gandhi Jayanti Day with the help of popular lungi Company. A small function was arranged and the district collector distributed the sanction letters. The function was attended by the press and the bank got wide publicity. Work relating to documentation and other preliminaries was completed within 10 days time and sanction advices were also despatched to the divisional office. Mr. Narayana Swamy received a letter of congratulations from the head office for getting good publicity for the bank in the process. The installments were regularly repaid for some time. In the month of December, he received another circular from the head office in which the management requested the branches to step up the advances under the DRI scheme before the end of December as there was still a short-fall in this area. Encouraged by the prompt repayment, Mr. Narayana Swamy disbursed 500 more loans under the same scheme with the help of the same company and achieved more than what was anticipated by the higher authorities. In the process, he could not complete the usual formalities that are required to be done under the scheme such as writing up of documents, sending sanction advices to the divisional office, etc. He was anticipating arrival of additional staff which was promised to him earlier by higher authorities on the basis of the number of accounts. The divisional management could not send the promised staff because of delay in recruitment. In the meantime, an officer from H.O. arrived at the branch for investigation. The officer informed the manager that he would like to inspect all documents relating to the weavers accounts under the DRI scheme and also visits the villages to interview some of the beneficiaries. Pressed for information, the investigating officer told Mr. Narayana Swamy that there was a complaint against the branch that it obtained loan documents from the beneficiaries but no amount was disbursed to them. His report to head office read: "the branch has committed many irregularities, like not carrying out pre and post sanction inspection, not observing usual legal formalities like completion of documents, etc. They did not even advise the Divisional Office about the sanctions and get confirmation." On being contacted by the case writer, Mr. Narayana Swamy said: "I have been with the bank for over 20 years now. In the beginning I was opposed to such proposals for ethical considerations as it seemed to me that such proposals defeat the very philosophy behind this scheme. I had to go for it under pressure on the first occasion. The results, however, inspired me. I felt that the performance could be improved in this manner and I went ahead with the scheme wholeheartedly. Now, the way my performance is appreciated (by appointing an investigating officer!) despite my having kept the bank's interest intact all along, I swear I would never try to excel and float along like many of my other colleagues." Dr Vijay Sharma, Asst Professor, Department of Management, Government Engineering College, Bikaner-334001 Vikalpa Volume-10 No.02 April-June 85