Palai Central Bank - Dominant Position

Dominant Position

In 1935, the Reserve Bank of India was established to take over from Government of India the functions performed by the Controller of Currency and from the Imperial Bank of India, the management of Government accounts and public debt. It was a privately owned institution with its Central Office initially in Kolkatta.

In the same year, George Thomas Kottukappally, the brother of Director George Joseph Kottukappally, became a Director of Palai Central Bank. As the Travancore Debt Relief Act was coming into existence in 1937, one of the first Directors of the Bank, Jacob Cherian Maruthikkunnel, was nominated to the Sree Chitra State Council to pilot the relative Debt Relief Bill, as it was expected that banks would be affected by the Act.

In 1937, two of the major banks of Travancore – Travancore National Bank and Quilon Bank – were amalgamated to form a large bank by name Travancore National and Quilon (TNQ) Bank. However, the large entity could get only a very brief period of existence, as in the very next year it was liquidated on the orders of C. P. Ramaswami Iyer, Dewan of Travancore. This led to the collapse of more than 60 small banks. But Palai Central Bank, which was the leading bank then, remained unaffected.

In 1940, industrialisation received a boost as power supply was started in Travancore from Pallivasal Project and a stream of industries like FACT and Ceramics, Kundara were started. In 1945, the State had another milestone in banking as the State Bank of Travancore was started.

With India's independence in 1947, the first popular government assumed power in Travancore in 1948 with Pattom Thanu Pillai as Chief Minister. The new Chief Minister told the Bank’s Management that with the dawn of independence, the Bank could make a major contribution in nation building. The Bank rose to the occasion, taking the leadership in subscribing to government bonds for large amounts. Development projects of the State that the Bank financed included the construction of the Trivandrum-Nagercoil Cement Concrete Road, which now forms part of NH-47.

At the time of independence, the level of deposits and advances of the Imperial Bank of India, the largest bank in the country, was Rs.275.14 crores and Rs.72.94 crores respectively, which today gives an idea about the value of Rupee - and the level of banking - then.

In the 1940s the Bank enjoyed an unprecedented financial position and influence. The chief editor of Malayala Manorama Daily spoke in a TV interview (decades later) about the Palai Central Bank management helping their founder Mammen Mappilai – who was struggling to revive the newspaper – by offering to take over the paper as a whole or to invest in its shares, as a friendly gesture of Joseph Augusti towards a close family friend. Eventually, an investment of 20% in shares was made.

In 1948, K M Joseph Kayalackakom – who had become a Director of the Bank in 1940 following the death of his father and the first Chairman of the Bank, Augusty Mathai – moved from Trivandrum to the Bank's head office at Pala. He then became the virtual General Manager of the institution.

In 1947, at a time when there were no Management Schools anywhere in the British Empire, Joseph Augusti sent his cousin KM George to the United States for management studies. This gives an indication of Augusti's vision and farsight. KM George took his MBA degree from New York University in 1948 thus becoming the first MBA degree holder of the State. In 1949, he joined the Bank as an executive. He was to later become the Secretary and Chief Executive Officer of the Bank.

In the late forties it was found that during the previous few years, the institution had drifted and slowed down from its previous spectacular growth rate. Officials, who had the charge of advances, had not been successful in controlling subordinates sufficiently to ensure discipline over making of advances. Several advances had proved to be doubtful, although their percentage in total advances was not high. Strict discipline was now enforced. A series of innovative schemes, were also introduced which brought not only order to the Bank but also set it on a course of further rapid growth.

In 1949, the Reserve Bank of India (RBI) was nationalised and the Banking Companies Act came into existence (later renamed as Banking Regulation Act). This legislation gave RBI complete control over commercial banks. As RBI entered the picture, it continuously pursued the question of the old doubtful advances of the Bank, although it was satisfied with the Bank’s subsequent operations.

In 1950, when a new Diocese of the Catholic Church was formed in Pala, it was an open secret that the Bank was the prime mover in bringing the Diocese to Pala. The founder Managing Director of the Bank Joseph Augusti led a delegation that accompanied the new Bishop Mar Sebastian Vayalil to Rome for the investiture ceremony. The Bank also took keen interest in extending assistance to the initial ventures of the new Diocese of Palai. In 1953, the Bank had the honour of according a grand reception to Eugene Tisserant, Dean of Vatican's Sacred College of Cardinals, at the residence of the Managing Director in Palai during the Cardinal's historic visit to Kerala.

In 1953, George Thomas Kottukappally, who was still a Director of the Bank, became a Member of Parliament. Even after that, he continued to be a Director. In the same year, when A. J. John, Anaparambil (who had become Chief Minister of the integrated Travancore-Cochin State) resigned, he accepted the Bank’s invitation to join its Board of Directors.