Palai Central Bank
The bank's existence was during the period preceding and immediately following India's independence when Kerala – a small state in the far south – exerted very little influence in national policy.
It was also a period when the need to protect the interests of different segments of society was not a major consideration when the central government made policy decisions.
Joseph Augusti, who belonged to a family of agriculturists and traders, had operated other businesses before he entered banking.
A young boy coming to deposit the scholarship amount he got received the same service that large depositors enjoyed.
This was in sharp contrast with their counterparts at the Imperial Bank of India, who were totally unapproachable to the common man.
As the Travancore Debt Relief Act was coming into existence in 1937, one of the first directors of the bank, Jacob Cherian Maruthukunnel, 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.
With India's independence in 1947, the first popular government assumed power in Travancore in 1948, with Pattom Thanu Pillai as Chief Minister.
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.
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.
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.
Joseph Augusti led a delegation that accompanied the new Bishop Mar Sebastian Vayalil to Rome for the investiture ceremony.
In the same year, when A. J. John (who had become Chief Minister of the integrated Travancore–Cochin State) resigned, he accepted the bank's invitation to join its board of directors.
He had succeeded B Rama Rau, who resigned due to differences with the Finance Minister after a long period of nearly eight years in office.
Towards the end of that year, RBI, under the influence of the north Indian bankers' lobby, initiated a series of steps in the Palai Central Bank.
These steps, taken with the stated object of improving the bank's working, were apparently aimed at wrecking the institution.
Also, K M George was asked to step down from the post of chief executive officer and to continue as Secretary of the bank.
[9] In February 1960, a new ministry assumed office in Kerala with Pattom Thanu Pillai as Chief Minister.
In August of that year, the Governor of RBI succeeded in persuading Desai to close the Palai Central Bank, which, he told him, had too many doubtful advances.
The fact that all the doubtful advances were more than a decade old and related to the period before the introduction of the Banking Regulation Act was not conveyed to him.
Justice P T Raman Nair, the presiding Judge of the Kerala High Court, ordered the winding up on 8 August 1960.
When a group of Kerala MPs met Nehru requesting that the bank be revived, he told them that he would like to, but his insistence would lead to the resignation of Desai.
When Chief Minister Pattom Thanu Pillai met Desai to make a personal appeal, he cut him out by asking how much money he had lost.
A furious Pattom Thanu Pillai told him that, like Desai, he was also a true Gandhian, and he had never had a bank account in his life.
In the Supreme Court, the bank's case was argued, among others, by Gopal Swarup Pathak, who later became vice-president of India.
When the Finance Minister of the country stated in Parliament that the bank's deposits had hardly 15% asset backing, the people had no reason to disbelieve.
About 30 years later, in the early 1990s, when banks in India faced a crisis of mounting losses and high levels of non-performing assets, an interviewer asked a now-retired Justice P T Raman Nair about his thoughts on the winding-up order of Palai Central Bank three decades ago.
This demand was partially met years later when the Government introduced a policy to appoint a career banker as one of the Deputy Governors of RBI.
