Bank of India- A Star in the Galaxy

These 3 principles are the foundation stones of the 'Bank of India'.

 by Rajeev Pathak

Bank of India, a Star in the Galaxy was born on 7^th September 1906. The bank has entered into 116^th year of its existence in 2021. It will be appropriate to turn over a few pages from the history of this great institution. In this post, we will learn about 3 principles which were laid down as foundation stones by its founders. 

Bank of India Office at Fort, Mumbai. (Image courtesy: Travel India) 

Background:

The Swadeshi Movement was in full swing in different parts of the country. The Drain Theory of Dada Bhai Naoroji was being accepted by more and more people. In his book, Poverty and Un-British Rule in India, Dada Bhai Naoroji had concluded that the British were siphoning the wealth of the country to England and this was the main cause of the poverty of our people and economic crises in our country.

Several institutions including manufacturing units and banks were founded all over the country during this period. Business leaders were largely inspired by the economic philosophy and political views of freedom fighters like Gopal Krishna Gokhle, Bal Gangadhar Tilak, Ramesh Chandra Dutt, Lala Harkishan, and Lala Lajpat Rai, and others.

The Star was born:

The Bank of India, a great institution was conceived in a meeting of prominent businessmen held on 31^st July 1906 at Navsari Building, the then Head Office of Tata & Sons (Now Tata Sons Limited) at Mumbai. 

  Mr. Ratanji Dadabhoy Tata, the key founder

The meeting was presided over by Mr. Ratanji Dadabhoy Tata. Other prominent industrialists and businessmen who happily joined as founders were Sassoon David, Gordhan Das Khatau, Dwarkadas Dharamsey, Shapurji Broacha,  Cowasjee Jehangir Readymoney, and Lalubhai Samaldas Mehta. After a few meetings and formalities, The Bank of India Limited, a Star in the Galaxy was born on 7^th September 1906.

Survival for more than 100 years is not a small thing for any company, particularly when it is a financial institution. The principles set out by its visionary founders have helped the Bank to survive during the worldwide economic crisis during two world wars and also post-independence.

Simultaneously, the bank has changed itself and its policies with the changing times and kept its flag waving high in the sky.

Objectives:

The Bank of India Limited was founded to provide financial assistance to Indian businesses and industries. As mentioned earlier that was the time when people were annoyed with the economic policies of the British Government.

As per the original Prospectus of the foundation of the Bank published in 1906, the following were the objectives of the Bank. These objectives are like guiding principles and the foundation stones of the Bank of India and are relevant even today.

Three Guiding Principles:

·       Undertaking Safe Business

·       Ensuring Safe Returns

·       Establishing the reputation and credit of the Bank on a firm and sound business.

Risk Management:

To achieve the above objectives, the Bank decided in the 1^st meeting of the Board of Directors in 1906:

Special provisions were to be made in the Articles of Association about;

·       The Bank will not grant any Advances against mortgage or any immovable property,

·       The Bank will not lend against Shares & Debentures except for Loan against Government guaranteed instruments, and

·       The Bank will not undertake Foreign Exchange operations.

So who says that Risk Management, as a concept, has come to India now, it was well practiced more than a century ago by the Bank of India.

It is pertinent to note that during that period many new banks had come up in different parts of the country. Only a few survived, approximately 78 banks were reportedly had gone into liquidation.

Top Management’s integrity at its best:

The Bank of India Limited invited subscriptions to raise its capital in 1906. The face value of the share was Rs.100 and application money was kept at 25%.

The issue was oversubscribed 14 times.

The oversubscription amount was refunded & shares were allotted. The Bank could have retained the oversubscribed portion up to a certain extent, but Bank refunded surplus money. Just compare this decision of the then Bank management with the present scenario in the IPO (Initial Public Offer) market. At this point, it will be logical to remember the words of the Bank’s Founder-Chairman Mr. Sassoon David. He said,

 “ Our purpose is not to run business with shareholders’ money but to keep what is sufficient to afford protection to all stakeholders.

Smaller the ratio of paid-up capital to working capital, easier to pay Dividends & reward fair returns. “

(Ref. : The Bank Of India 100 Years of Prudential Banking by Abhik Ray).

This also shows management’s quality, character, value system, and profit-sharing policy.

1^st Chairman of Bank of India

This will not be out of context to remember the 1^st Chairman of Bank Of India.

Sassoon David

Mr. Sassoon David was a prominent businessman of his time. He was a Baghdadi Jew. He founded his own business firm Sasson J. David & Co.,  which dealt in cotton and tobacco. The Firm had its offices in China and Japan.

Mr. Sassoon David

Mr. Sassoon David was the lead promoter of the Bank of India and became its 1^st chairman. Other than this, he held several important positions like Chairman, Bombay Mill Owners Association, Sheriff of Bombay, Chairman, Bombay Municipal Corporation, etc.

His family was considered to be the biggest wealth-generator in Bombay. Sassoons were not only the largest textile mill owners in India, but were also responsible for supporting over half of Bombay’s households either by direct employment, or indirect trade says R.N.Bhaskar in his article in moneycontrol.com on 4^th February 2020. 

Sassoon David was a generous man. He contributed to the construction of many well-known buildings and monuments of Bombay, Pune, and other places. They included the Bank of India Building at Fort, Mumbai, Prince of Vales Museum (Now Chhatrapati Shivaji Vastu Sangrahalaya, The Institute of Science and the Gate Way of India.

Sassoon David was honored as a member of the council of the Governor-General of India and Imperial Legislative Council. He was also honored with Knight Commander of the Order of the Star of India (K.C.S.I), a rare honor in 1922. 

The Sun never sets on Bank of India

The saying has been that the Sun never sets on Bank of India. This is because the Bank has its presence in 18 countries spread over 5 continents. Today, the Bank of India is a public sector bank, owned by the Government of India. Its shares are listed at all major stock exchanges including NSE/BSE. 

The Bank which commenced its operations with only one office in Mumbai in 1906, today has over 5000 branches in India and 45 branches/offices abroad including 4 subsidiaries and a joint venture. 

 'Star House', thnew Head Office of Bank of India at Bandra-Kurla Complex, Mumbai.

In India itself, the Bank of India has been associated as a promotor /co-promotor of several institutions. It has several first to its credit. Having an account with  Bank of India was considered to be a sign of creditworthiness. Its current account cheque was considered as trustworthy as a demand draft issued by a bank. The Bank could earn this reputation as its foundation was based on certain principles as discussed above. 

The Bank has always followed the policy of prudence and caution. At the same time, it has been at the forefront to adopt new technology. it has changed itself with the times. 

In the end, we wish 

Long Live Bank of India.

Contact: boirajeev@gmail.com