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When holidays hold banking hostage

Arcot Purna Prasad, March 26, 2016
Our country, which respects all religions and favours none, is also known as the ‘Land of Holidays’ because it needs to celebrate several religious festivals.

This week the country celebrated Holi on 24 March and Good Friday on 25 March while 26 March is fourth Saturday when the banks are closed by Reserve Bank of India (RBI) directive.

The bank trade unions negotiated with the Indian Banks Association, with support from the RBI, to declare the second and fourth Saturdays holidays of every month for banks from September 2015.

The government, along with the RBI, appears to take a uni-dimensional view solely from a banking perspective over holidays which adversely impact the economy. For instance, the national stock markets operations are affected whenever the banks are on holiday.
To that extent, the efficiency of the banking sector which is the backbone of the service economy has a bearing on the country’s financial health.

So much so, bank holidays determine the pace of business in the country because when banks are on holiday, educational institutions, stock markets, multinational companies among others also shut shop.

Excessive holidays


The RBI in conjunction with the state/ Central government has earmarked 26 days on an average annually for the 26 public sector banks, 20 private sector banks, 43 foreign banks, which comprise the national banking sector, apart from the many rural cooperative banks. These banks across the 29 states and seven Union Territories of the country decide holidays in tune with festivals which are specific to states.

Therefore, in addition to the 26 annual holidays that banks enjoy, they have lately added a further 26 holidays. This means that banks have a total of 52 holidays and work for only 313 days (without Sundays) annually with a six day work week.

With such an excessive number of holidays, Small and Medium Business Enterprises (SMBEs) tend to suffer because they affects the smooth cash flow which is the life-blood of any business.

The finance and accounts sections of various SMBEs are ready to remit their cheques into banks on Fridays; however, they can be credited to their respective accounts only on Mondays.

The SMBEs lose interest on their money for the days before they are credited into their bank accounts due to holidays. These SMBEs need bank support for their cash-related transactions.

Inconvenience to clients


Today, most bank branches are under-staffed and back-to-back holidays make clients crowd their bank premises.

The bank staff provides poor service and invariably asks its customers who have to make electronic fund transfers, open new accounts, Demand Drafts or obtain new cheque books come tomorrow.

On 10 April, 1995, when former Prime Minister Morarji Desai passed away, the country experienced six continuous holidays one after the other. Given that our national economy is embedded into the international financial system, such bizarre holiday culture creates confusion among foreign stake holders in the national economy.

Especially when overseas visitors have to transact business with the country, it is a challenge when financial institutions like banks decide to be shut due to festivals or other non-economic compulsions.

The banks, which are integral to the financial sector, hold the other industries like insurance and the stock markets hostage to their holiday culture.

While a lot of money is invested in information technology to make banking and finance operations seamless, such excessive holidays prove detrimental to progress.

Importantly, in an era of 24/7 banking culture, banks cannot take too many holidays which affects the nation’s financial health.

Undoubtedly, ATM cards enable withdrawal of money, but for all other bank operations, the excess of holidays are not conducive with regard to the country’s finances. When other service sectors like civil aviation and health care can work 24/7, why not the banking sector?

(The writer is an Associate Professor with Institute of Management, Christ University, Bengaluru)

 

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