Good Faith II - Second Time Lucky

In the first installment of this series, I have narrated how bankers are forced to ignore laid down guidelines to secure or retain good business or fearing loss of business.

Here is an incident wherein I trusted the customer and overlooked the established norms fearing that if I do not comply with his request, the customer would go to some other bank. This happened in a Capital-city of a State.

It was a very valued Account of the Branch and Bank Guarantee Limit of Rs. 30 Lakh had been sanctioned. One of the conditions of the sanction was that the customer would provide landed property worth about Rs. 50 Lakh as security. The firm was earlier enjoying a Bank Guarantee Limit of Rs 20 lakh and landed property valued Rs. 30 Lakh had been given as security. The customer was to hand over to us the title deeds of landed property worth Rs. 20 Lakh to make the total value of security Rs. 50 Lakh.

This Bank Guarantee was to be given to Railway Authorities in lieu of security-deposit for an work-order which the customer was awarded by Railways. A Bank Guarantee is a guarantee issued on behalf of a customer under which a bank has to pay the amount to the beneficiary (here the Railways) whenever the latter demands, without any question.

The customer came and told me that the documents relating to the additional property to be given as security was with his brother who was out of the city and would return after three days but he needed the Bank Guarantee the next day itself. He promised to handover the documents after 3 days when his brother would return. Earlier we had agreed to a similar request from him and he had kept his word. Taking into account the creditworthiness and dependability of the customer, I agreed. The Bank Guarantee was issued before receipt of security, as requested by him.

However, this time he did not keep his promise and the documents were not handed over even a week after the promised day. The Officer who along with me had signed the Bank Guarantee became panicky. I became very worried. The customer went on promising but did not do anything for full 10 days. He did not take my calls and avoided me in person. I went on praying to God to save us. I could not concentrate on anything and my sleep became disturbed.

Then one fine day the customer came to the Bank, surrendered the Bank Guarantee and requested us to cancel it. I did not ask anything, quietly and quickly cancelled the Bank Guarantee and heaved a sigh of relief. After that I asked him what had happened. He informed me that he had gone to another Bank and had got a Bank Guarantee for Rs. 75 Lakh. Originally, he had applied to us for a Bank Guarantee of Rs. 75 Lakh but the Controlling Authorities of my Bank had sanctioned only Rs. 30 Lakh.

We lost the Account and the business of this firm. The firm went to the other bank, for preventing which I had put so much at risk.

Here is another story of ‘due negligence’ by a banker to protect the goodwill and creditworthiness of a valuable customer. It was place in Bihar. I was the Chief Manager of the branch and the second-in-command was a Senior Manager. I was away. A cheque for Rs. 50000 drawn by this customer was presented. The balance in his account was very low. Usually he used to maintain good balance in his Account and no cheque issued by him was ever returned. The Senior Manager tried to contact the customer but could not do so. Returning the cheque would damage the reputation of the customer. So what did the good Senior Manager do? He debited the cheque to another customer’s Account, where there was sufficient balance “by mistake”! He could contact the first customer on the next day and told him what he had done the previous day. The customer thanked the S M profusely and immediately deposited sufficient amount to meet the cheque. Thereafter, the S M “corrected the mistake” and credited the amount back to the second customer’s Account. He then contacted the second customer and explained that a ‘mistake’ had been committed and ‘promptly’ rectified!!!

When I rejoined after two days, the S M explained to me the entire episode. I did not know whether to thank and congratulate him or to caution him against such dare devilry in future. I did both.

The Branch was rewarded by the grateful customer, who passed on further handsome business to us.

What would happened had the customer not deposited the amount or if he would have done so after a time gap? How would we have faced the second customer?

Such is the saga of good faith and ‘due negligence’ of bankers, all for improvement of business.

PROMISE:

Wait for more such real life stories!