Banking
Banks must follow rules for insurance policy: unions
Unions in the banking sector have cautioned their members to follow procedures while enrolling members under the government insurance schemes to be launched on May 9, said union officials.
 
Officials at some branches of nationalised banks told IANS that they were being pressured by the management to enrol account holders under the insurance schemes prior to its launch so as to show impressive numbers to the powers that be.
 
"Our top management has directed lower level officials to enrol customers under the insurance scheme by any means. So employees are filling up the forms in the names of customers," an official of a nationalised bank told IANS preferring anonymity for himself and his bank.
 
He said it is not known how the bank would proceed further on the issue.
 
"Whether the bank would debit the customer account's Rs.12 (for personal accident policy) and reverse the same if he objects to the debit is not known," he said.
 
The scheme clearly stipulates that express consent of the account holder is a must before enrolling him/her under the policy.
 
"In most branches the walk-in customer will be around 100-150 a day. But there are branches that claim collection of enrolment forms of around 300 in a day. This in normal course of business is not possible," he said.
 
"To satisfy myself, I had called around 150 customers to check out their views on their enrolment. While they agreed over phone and promised to come to the branch and sign the necessary papers the very next day, only one turned up as promised," he explained.
 
Thomas Franco, general secretary of the SBI Officer's Association, told IANS: "We are aware of the issue. The insurance scheme is good but the proper procedure is not being followed. We have asked our members to see the forms are duly filled so that no problem arises at a later date."
 
He said employees have been advised to get the Aadhar card details or any other proof with regards to the nominees.
 
As per the insurance scheme framework, an account holder aged between 18-70 would be provided a personal accident insurance cover (death, total disability) for Rs.200,000.
 
As a part of the enrolment form, an account holder also authorises the bank to debit his/her account each year by Rs.12 till contrary instruction is given.
 
The problem for the bankers would be high when there is a claim while the proposal form was not signed by the bank account holder.
 
"Going by the scheme of things, this may turn out to be a scam. There is no hurry in enrolling account holders. Banks can do this at their own pace rather than satisfying the egos of the powers that be," C.H. Venkatachalam, general secretary of the All India Bank Employees Association (AIEBA), told IANS.
 
"In the name of people schemes, the banking industry has become an extension counter of the government. While talking of giving autonomy for banks, the government is pushing its programmes through the banks," he said.
 
"The scheme is a good one. It will increase insurance penetration. But due to the pressure from the management, it may actually end up in a mess giving a bad name to the government," one banker warned.

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Bank Employees and Social Banking
Bank employees and unions will have to recharge themselves to a new set of objectives that would enhance the business of banks on one side and help the society on the other
 
May Day is usually the day to recall the assertion of their rights. For a change, the All India Bank Employees Association (AIBEA) during this 70th year thought of taking the initiative of enjoining social responsibility. Gone are the hard days of militant agitations as means to achieve fair compensation, safety, security and comfort in work places. Workmen and officer representatives are today part of the governance and management of banks. Machines dictate the employees’ ways of working. Discretion has less relevance now than in the past. Technology dictates the employees’ ways of working and management processes. But are the customers, a happier lot? The response is discouraging.
 
Ever since the introduction of banking reforms following the recommendations of Narasimham Committee 1 and 2 and the alignment with the global regulatory architecture through BASEL I, 2 and 3, technology and capital adequacy have become the prime drivers of growth in banking sector.
 
Mobile banking and micro finance institutions (MFIs) moved into the space left by the RRBs, weakened cooperatives, and rural branches of commercial banks. Banking correspondents and customer service points, White ATMs surfaced.  Who should we blame for providing this space excepting the lack of commitment and motivation of staff to align with the objectives of the nationalisation of banks?
 
Several progressive regulatory measures from the RBI – asset reconstruction companies, payments and settlement solutions, safe mobile banking and revisiting the priority sector definitions have all happened during this period. 
 
Success of social banking is a function of trust and banking with a human face. Banks’ business is growing exponentially. Globally inclusive banking has become a great concern. Several economies – with developed nations being no exception – are devising ways to make possible access to banking easy, convenient and cheap. Digital architecture is reshaping the way of banking of the future.
 
Seamless integration with the mobile phones, emails, messages between the banks and customers benefits the banks more than the customers. Massive data is going to be captured through cloud technology. Cyber security is going to be an issue that would haunt the banks continuously. There is a huge opportunity for banks to innovate in this space. 
 
“Being able to take advantage of, or react to, the digital revolution requires banks to behave in ways that they are not quite accustomed to. It requires extremely clear and quick cross-functional collaboration.” Says McKinsey in its November 2014 Report.
 
The demographic profile of bank customers will also undergo sea change. Senior citizens are likely to constitute 20% of population by 2025, demanding far different services from the bank than the present. The youth, that constitute 40% of population, used to working on active social media like the Facebook, Twitter and the like, wanting speed and accuracy of transactions and women demanding different products to suit their multiple chores at family and work.  
 
HM Khan, Deputy Governor of RBI, while inaugurating a Dena Bank’s Self-Service Branch bank exhorted very rightly; “The focus has been on alternative channels and digitisation of banking and move (banking) from assisted to self-service mode… But the fact remains in the Indian context that despite us moving in the Jet-plane age, we have the bullock cart as well. We have different market segments and have to look at the hand behind the machine as well….” He called for handholding of older generation on-branch customers and the new entrants through ‘a blend of software with human touch’. 
 
Managements would be hence forward busy in formulating strategic initiatives to withstand the competition both from domestic and global financial institutions (the presence of global financial institutions on Indian landscape has been doubling up), coping with regulatory compliances, evolving new products and measures to mitigate product and process risks continuously. In other words, managements would focus on risk management and compliance. Risk management should be viewed as a window of opportunity for greater earnings and greater profits than as cost centre.
 
Most of the members of the staff, unlike in the past, are comfortably placed in the work environment. They have negotiated settlements on wages, salaries and perks; they do not have to slog for balancing their daybooks or ledgers. They are the face of the bank. This is precisely the reason for the employees to be socially sensitive. 
 
In the absence of any substantive relationship issues with the managements now, the unions should devote their time in house for service to the customer far more friendly than now. It is time to give back to the society. The employees have to relocate and recharge themselves to a new set of objectives that would enhance the business of the banks on one side and help better reach to the society on the other.
 
Social banking has to be responsible and responsive to small and marginal farmers, leaseholders, micro and small enterprises, small retail shop owners, economically weaker sections and women in bottom-of-pyramid  that require more than banking to succeed in the enterprise they pursue and they look to the banks to help them in that direction. Field visits help the employees to understand the farmer and entrepreneur. The documents tell only ownership story and not the story of his production and marketing. 
 
Mutual understanding builds trust and trust begets trust. Banking in India is built on the Scottish principle of ‘suspect and respect’ and not the reverse. The reversal has to be engineered only through a change in the mindset and cultural shift in understanding the requirements of the 25% of the country that are still poor. The bourgeoning middle class and the elitist can always be cultured into technology and internet banking.
 
Employees have more leisure than most of their predecessors of yesteryears and fewer responsibilities on the home front as well because of nuclear families. If a group of employees can volunteer to adopt a village, visit at least for two days in a month in a picnic mode, enhance the customers’ knowledge of bank and its deposit and loan products, prepare at least one bankable project once in a quarter, 15 lakh viable projects with loyal customer base would turn banking an experience worth the life. This in essence will be the responsible and responsive social banking.
 
(Dr Yerram Raju Behara is a former senior executive of SBI and an economist and risk management specialist. The views expressed in the article are his personal.)

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COMMENTS

SuchindranathAiyerS

2 years ago

Why would Bank employees be any different from the Nation's leadership? Aren't they on the lower rungs of India's Neta-Babu-Cop-Milard-Crony Kleptocracy? ( Computerization has only increased the insouciance and the officers do not even read the screen properly it seems. Recently my ECS mandate for BSNL was bounced for Rs 1,070/- by State Bank of India Jayanagar 2nd Block putting me to enormous inconvenience. I have fixed deposits in excess of 20 Lakhs there and an overdraft limit that I never draw on) This would never have happened during our non-computerized days without there being Hell to pay for the erring officer).

GANESHKUMAR AP

2 years ago

Challenge is to be relevant!

PATTABHI

2 years ago

Dr Yerram Raju. has rightly flagged the opportunities and challenges that face the Bank Employees as Ache Din is being ushered in by the present Govt. I hope the Employees and Unions would now start focussing on social change and on making a difference to the Society with greater purposive involvement.

Bank FDs with no premature withdrawal
The RBI has fixed Rs15 lakh as a minimum amount for FDs that cannot be withdrawn prematurely and will fetch higher interest. This is arbitrary and unfair 
 
Last week, Reserve Bank of India (RBI) permitted banks to offer differential interest rates on deposits based on whether the term deposits are with or without premature withdrawal facility subject to the following four conditions:
 
i. All term deposits of individuals (held singly or jointly) of Rs15 lakh and below should, necessarily, have premature withdrawal facility.
 
ii. For all term deposits other than (i) above, banks can offer deposits without the option of premature withdrawal as well. However, banks that offer such term deposits should ensure that at the customer interface point, the customers are, in fact, given the option to choose between term deposits either with or without premature withdrawal facility.
 
iii. Banks should disclose in advance the schedule of interest rates payable on deposits i.e. all deposits mobilised by banks should be strictly in conformity with the published schedule.
 
iv. The banks should have a Board approved policy with regard to interest rates on deposits including deposits with differential rates of interest and ensure that the interest rates offered are reasonable, consistent, transparent and available for supervisory review/ scrutiny as and when required.
 
Unfortunately, these guidelines are so scanty and perfunctory, that they do not serve the needs of bank customers at all. By putting the first condition that all term deposits of individuals of Rs15 lakh and below should necessarily have premature withdrawal facility, majority of bank depositors are completely deprived of the benefit of higher interest rate expected on those deposits without premature withdrawal facility, though they are willing to abide by this condition.   
 
Apparently RBI seems to have protected the interest of small depositors by imposing this first condition, but in reality, the central bank has prevented small depositors from benefiting from the higher rate of interest expected on those deposits without premature withdrawal facility. RBI should have allowed the banks to offer both types of deposits to all leaving the choice to the depositors, as it would have certainly helped those who are prepared to lock in their deposits for long periods without the facility of premature withdrawal. 
 
The real purpose of this entire exercise of having dual type of deposits is to help banks in their asset-liability management, which in turn would help the depositors also, if banks offer higher interest on those deposits without premature withdrawal facility.  
 
The absence of premature withdrawal facility, however, does not and should not mean that they cannot raise a loan on the security of those deposits, to meet their unforeseen needs, and banks will have to permit lending against the security of their own deposits, as they presently do, for all depositors. RBI should make this clear in their guidelines as it is the safest lending operation for all the banks.  
 
The banks in general levy a penalty of 0.50% to 1.00% per annum when the depositors withdraw their deposits before maturity. Now that the depositors who opt for this facility of premature withdrawal will get lower interest rate than those who opt for without premature withdrawal facility, it is but fair that the former should not be charged any penalty when they wish to withdraw the deposits before its due date. In fact, those who prematurely withdraw their deposits will be entitled to only the rate of interest applicable for the period for which the deposit has remained with the bank, which is definitely lower than the originally contracted rate. Hence levying a penalty over and above such lower rate, would amount to double whammy for those who withdraw their deposits before maturity due to unforeseen and under compelling circumstances.
 
In short, RBI should rewrite the rules of deposits, with or without premature withdrawal facility, preferably as under:
 
1. For all term deposits banks can offer deposits without the option of premature withdrawal as well. However, banks that offer such term deposits should ensure that at the customer interface point the customers are, in fact, given the option to choose between term deposits either with or without premature withdrawal facility.
 
2. The interest rate offered on those deposits, which do not have the facility of premature withdrawal, should necessarily be higher than that offered on those deposits of the same tenor with the facility of premature withdrawal, so as to offer an additional benefit/incentive for those who have opted not to withdraw the deposit before maturity. 
 
3. The banks, however, should continue to grant loans to individual depositors on the security of their own term deposits as hither to, irrespective of whether such deposits are with or without premature withdrawal facility. And the terms and conditions of granting loans against their own deposits should be made clear in advance at the time of accepting the deposits by banks. 
 
4. Those individual depositors who opt for deposits with premature withdrawal facility should not be charged any penalty if and when they withdraw their deposit before maturity in view of their having accepted lower interest rate on such deposits. 
 
5. Banks should disclose in advance the schedule of interest rates payable on deposits i.e. all deposits mobilised by banks should be strictly in conformity with the published schedule.
 
6. The banks should have a Board approved policy with regard to interest rates on deposits and loans there against, including deposits with differential rates of interest and ensure that the interest rates offered are reasonable, consistent, transparent and available for supervisory review/scrutiny as and when required.
 
Banks do not exist without the support and patronage of depositors, who provide the stock in trade for banks to lend and make profit out of the hard-earned savings of the public. Despite this, bank depositors are often discriminated against and are not treated fairly both by the banks and the regulator. For instance, RBI has prohibited levying of penalty on pre-payment of housing loans, but the depositors are not given this benefit when they withdraw the deposit before maturity.
 
Now that banks will accept deposits with or without premature withdrawal facility, this is the right time for RBI to instruct banks to waive levying of penalty on those deposits which have premature withdrawal facility as the interest rate offered to them would be lower than those deposits without premature withdrawal facility. 
 
(The author is a banking analyst and he writes for Moneylife under a pen name ‘Gurpur’.

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COMMENTS

atul shah

2 years ago

If no penalty for premature encashment of bank deposit is levied,
that investment is money at call...
Banks do satisfy your above expectation by offering saving bank a/c... Why Bank shall offer higher rates than s/b rates for FD having any time exit option at nil penalty?

SUNIL KUMAR HEMNANI

2 years ago

Here is a situation wherein a customer wonders if the RBI is looking after his interests at any stage .The fact of the matter is ever since Mr Rajan has taken over the question you have got ask yourself is "Does he have any intention in looking after the customer " .The ATM number of withdrawals was another such issue.The limitations is another factor to make you consider he is not bothered about small customers.

Anand Doctor

2 years ago

Kudos to "Gurpur" for highlighting the lacunae in the new FD rules and suggesting sensible, implementable solutions.

As an aside, I wonder if Debt funds would now become more poplular with retail investors investing Rs. 15 lakhs or less - as these funds provide immediate liquidity, that FDs now won't...

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