Money & Banking
No cartelisation in fixing saving deposit rates: SBI

According to SBI MD Gupta, the bank's decision not to raise interest rates on savings deposits is a purely commercial one and does not amount to cartelisation


Mumbai: The nation's largest lender State Bank of India (SBI) on Wednesday dismissed allegations of cartelisation by big banks in keeping savings deposit rate unchanged despite the Reserve Bank of India (RBI) deregulating this over a year ago, reports PTI.

Disputing the charges, SBI Managing Director and Chief Financial officer Diwakar Gupta said the bank's decision not to raise interest rates on savings deposits is a purely commercial one and does not amount to cartelisation.

"I said it is not cartelisation," Gupta told reporters on the sidelines of a conference organised by consulting and accounting major PwC here.

SBI and its five subsidiaries control, which nearly control 25% of the banking system, have not increased their savings account deposit rates. They offer 4%.

Gupta said he has been reading reports over the past few days about a possible action by the competition watchdog on banks for allegedly acting as a cartel by not increasing the rate on saving deposits, which was deregulated by the Reserve Bank in the October 2011 credit policy.

The interest rate on savings accounts was the only regulated product in banking till the RBI deregulated it.

Following this, only two commercial banks -- Kotak Mahindra and Yes Bank -- raised the deposit rates to 6 and 7% respectively. These banks, which were facing problems in raising the low-cost CASA (current account, savings account) deposits in the past, claim the move has been immensely beneficial.

From the cooperatives space, city-based Saraswat Bank had also increased the rate to 7%.

Other banks currently offer just 4% on an annualised basis to savings bank account holders, which was even lower at 3.5% till April 2011.

"The fact is that if I move rates by 1%, it costs me a billion dollars. I will never do it. Because nobody else does it, there will always be this question whether this is cartelisation," Gupta said.

Right from the day one, SBI has been maintaining that it will not be the first one to increase rates, he added.

In a discussion on competition regulation at the PwC summit, Gupta said: "It is absolutely within the domain of the regulator to look at anything. But in the short-term, the industry then tends to become tentative when this kind of thing happens."

"I think regulators have done a great job. At the same time, the regulatory action cannot be in the best interest of the industry some times... I think somewhere, we do need to see if regulation is assisting the overall framework.

"I think the same is true for telecom, the same is true for mining, aviation etc.," Gupta added.

On the issue of judicial intervention in business matters, he said while staying a matter is fair legally, the judiciary should be sensitive to cost overruns if a proposal gets stuck.

"In an economy where 14% is the cost of credit, if a project is delayed by two-and-a-half years, it is absolutely unviable...that is something which is important for the judicial process to recognise," he said.

Banks have been hit as demand for project finance has reportedly dried up. With corporate loan demand now restricted to working capital funds, banks are now shifting focus on the retail borrowers.




Pankaj Mehta

4 years ago

By their own admission, SBI is keeping 3 billion dollars of customers money (7% - 4%) with 3% less interest than YES bank (surely YES bank is still profitable with 7% interest paid).

siddharth biswal

4 years ago

cost of deposits can never be same for all PSU banks as well as Pvt banks,then how come rates are same.If SBI had increased then others would have followed too.Firstly all PSU banks should be merged into 2-3 entities to benefit from synergy as they duplicate efforts without any added benefit.SB rate shd be linked to Govt bond rate.

Trying to help revive Kingfisher: SBI

A week after the expiry of deadline that the lenders had set to Kingfisher management to come up with a revival plan, including a $1 billion capital infusion, State Bank of India has said the banks are trying everything to find an amicable solution

Mumbai: State Bank of India (SBI), the lead banker in the 17-lenders consortium that extended Rs7,000 crore loans to the now grounded Kingfisher Airlines, on Wednesday said the banks are "trying to do everything to find an amicable solution" to the carrier's financial troubles, reports PTI.


The SBI comment comes a week after the expiry of deadline that the lenders had set to the airline management to come up with a revival plan that includes a $1 billion capital infusion.


Kingfisher is a good company with a high brand value and lenders are trying to do everything to see that an amicable solution is found, SBI Managing Director and Chief Financial Officer Diwakar Gupta told reporters on the sidelines of a PwC event.


After the regulator DGCA suspended the airline's flying licence on 19th October, SBI Chairman Pratip Chaudhuri had set a 30th November deadline to the airline management to infuse at least $1 billion in fresh capital as part of the revival exercise for the banks to consider lending afresh or recasting the existing loans.


SBI has an exposure of Rs1,500 crore to the Bangalore based airline, which has not been serviced since January this year.


Launched in May 2005, the airline has not reported a single penny in profit and has bank debt over Rs7,000 crore and unpaid interest thereon since January, apart from over Rs1,000 crore in vendor and tax arrears.


It also has accumulated losses of nearly Rs10,000 crore, apart from the salary dues of the past seven months.


Labour unrest towards the end of September led to the airline suspending operations from 1st October  and on 19th of the same month, the regulator DGCA had suspended its flying licence.


If RTI Act empowers the citizens against the state, does Aadhaar empower the state against the citizens?

The report of the Group of Experts of the Planning Commission has submitted a set of recommendations for inclusion in the Privacy Act last fortnight. Is this a ploy by the government to use Aadhaar to counter the Right to Information Act? After all, Aadhaar reveals all personal data of an individual to the government, which may violate his or her fundamental right to privacy

In the seven years of the existence of the RTI (Right to Information) Act, citizens have been empowered to access vital information from government offices. Has the government now become empowered to access private information of individuals through the Aadhaar scheme being doled out to residents by the Unique Identification Authority of India (UIDAI)? Experts opine that an information revolution in the form of RTI now has a counter revolution in the avataar of UID. The attempt to use Aadhaar to provide government subsidies by a more transparent network is allegedly just a cover up.

Nikhil Dey, leading RTI activist and founder member MKSS has stated in his article in the recently published book by YASHADA titled “Milestone 7: Journey of RTI Act” that, seven years down the line, the information revolution now has a counter revolution that is detrimental to citizen’s privacy. He writes: “There are new debates about the ideologies of information and democracy, and there are now attempts to counter attack that have elements of a ‘Counter Revolution’. There are new information laws in the making that give the state control over detailed information about every citizen. There are new draft privacy laws that claim to keep this information secure from the prying eyes of other citizens. There are secrecy clauses embedded into laws on data collection that once again seek to give the custodians of power exclusive control over information. And most threatening perhaps, are legal frameworks that legitimise the use of new technologies of information gathering to watch over every element of people’s lives under the guise of 'good' governance, ‘greater’ security, and ‘safer’ democracies!”


Dey further adds: “It is no longer a security agency gathering ‘intelligence’ about a select few, but a legal framework that allows those in power to watch all people all the time.


As Gopal Gandhi, former governor of West Bengal so incisively cautioned, “We must ensure that tools like the UID must help the citizens watch every move of government; not allow the government watch every move of the citizens.’ As they are today, the RTI and the UID stand on contrary sides of the information debate. If the RTI is a tool of the citizens to control the government and hold it accountable, the UID is a tool of the government to control the citizens.”


Venkatesh Nayak, programme co-ordinator, CHRI, who is researching on this subject, has appealed citizens to invoke RTI to find out details of actions planned by state governments on the basis of the finance ministry’s advice to expand the Aadhaar network where pilots of the controversial UPA government’s subsidy schemes will be rolled out linking UID to social development programmes. He states that, “there simply is no information about these issues in the public domain—only the rush and urgency of implementing the pilots. All this is hugely problematic because the government is not doing its mandated duty of complete proactive disclosure of facts and figures relating to the implementation of the UID as is required under Section 4 (1) of the RTI Act.”


Last week, the Supreme Court agreed to examine the legal sanctity behind the much hyped Aadhaar scheme, which is a direct pass for the controversial government scheme to directly transfer cash to eligible person’s account. The PIL has been filed by KS Puttuswamy, a former judge of the Karnataka High Court. His contention was that not only does the Aadhaar scheme bypasses the Parliament where the National Identification Authority of India Bill, 2010, is being still discussed but it also reveals all personal data of an individual to the government, thus violating his or her fundamental right to privacy.


The objectives of the National Identification Authority of India Bill, prepared by the Standing Committee on Finance (2011-2012) chaired by Yashwant Sinha states: “ It has been observed and assessed by the government that the issue of unique identification numbers may involve certain issues, such as (a) security and confidentiality of information, imposition of obligation of disclosure of information so collected in certain cases, (b) impersonation by certain individuals at the time of enrolment for issue of unique identification numbers, (c) unauthorised access to the Central Identities Data Repository (CIDR), (d) manipulation of biometric information, (e) investigation of certain acts constituting offence, and (f) unauthorised disclosure of the information collected for the purpose of issue of unique identification numbers, which should be addressed by law and attract penalties.


To read about opinion on and coverage of Aadhaar at Moneylife, click here.

“In view of the foregoing paragraph, the government has felt it necessary to make the said Authority as a statutory authority for carrying out the functions of issuing unique identification numbers to residents in India and to certain other persons in an effective manner.  It is, therefore, proposed to enact the National Identification Authority of India Bill, 2010, to provide for the establishment of the National Identification Authority of India (NIDAI) for the purpose of issuing identification numbers (which has been referred to as Aadhaar number) to individuals residing in India and to certain other classes of individuals and manner of authentication of such individuals to facilitate access which they are entitled and for matters connected therewith or incidental thereto.”

Former chief justice of the Delhi High Court, Ajit Prakash Shah—in the report on Group of Experts on Privacy constituted by Planning Commission of India—made a set of recommendations to the government for inclusion in the Privacy Act.

The report of 15 October 2012 states: “The ubiquitous use of personal identifiers, like UID, PAN, and passport, to complete transactions is taking place across India. As a result of this practice, centralised and decentralised databases that contain detailed records of individuals and their transactions are being converged by organisations and bodies on an ad hoc basis. The amount and granularity of information that can be converged through the use of these personal identifiers makes it possible for comprehensive profiles to be created of individuals and track individuals across databases via their personal identifier. In India, the use of personal identifiers across databases by third parties for tracing, convergence, or collation purposes is not addressed in the legislation that legally establishes the personal identifier (the NID Bill, Citizenship Act, the Passport Act, and the Indian Tax Act, etc) and is not addressed at the organisational or departmental level through policy. Thus, it is unclear if access is taking place in accordance with laws in force, and what standards are in place to prevent the unauthorized disclosure/access/use of personal identifiers. Therefore, it is not clear which organisations/bodies are legally collecting and storing personal identifiers, for what purposes, who is accessing data based on personal identifiers, how personal identifiers are being secured, how long personal identifiers are being retained, and if/how the personal identifiers are deleted. This creates a situation where governmental and private sector organisations can potentially access and use information directly or indirectly connected to, or generated by personal identifiers for multiple purposes without explicit authorization, and without the individual being aware or consenting to such access and use. The use of personal identifiers across databases should be in compliance with the National Privacy Principles.”

To read about work done by Moneylife in the field of RTI, click here.

Even before the privacy of a citizen has been properly secured, the central government has gone ahead, putting up personal details of citizens in the technology space where not only others but the government itself can access personal data and misuse or abuse it. So while RTI Act empowers a citizen; the UID’s Aadhaar number scheme empowers the government.


To read more from Vinita Deshmukh, click here.


(Vinita Deshmukh is the consulting editor of Moneylife, an RTI activist and convener of the Pune Metro Jagruti Abhiyaan. She is the recipient of prestigious awards like the Statesman Award for Rural Reporting which she won twice in 1998 and 2005 and the Chameli Devi Jain award for outstanding media person for her investigation series on Dow Chemicals. She co-authored the book “To The Last Bullet - The Inspiring Story of A Braveheart - Ashok Kamte” with Vinita Kamte and is the author of “The Mighty Fall”.)




4 years ago

There is also "Mission Creep". KYC (Know Your Customer) started with what might be pardoned as a necessary intrusion into one's privacy. And then it began to expand. Now they are asking for all sorts of intimate details of my personal life that are NO business of the State.


4 years ago

i am unable to comprehend as why so much noise is made against Aadhaar card like it empowers the State against person having Aadhaar card. could the author clarify by some live example? or is it a bogey by the well heeled who find fault with any well meaning Govt initiative after all Nandan Nilekeni has come out with a brilliant scheme where by ghosts/duplicates cannot draw anything and seepages is eliminated upto that extent. with my experience as a Banker over 25 years i can say Aadhaar will definitely eliminate ghost beneficiaries.


4 years ago

Could anyone enlighten me about PAN.
Is PAN mandatory?

For remitting cash (an amount of 500000 or more) in a Bank one must provide his PAN number. Is it legal?

Why should a person who doesn't have any taxable income be forced to take a PAN CARD? Can it be challenged in a court of Law?

Can a person use Aadhar / ration card / voters Id instead of PAN card in a banking transaction? If not why?



In Reply to Dev 4 years ago

Thanks for your comments.
Here are the links of RBI circulars regarding use of PAN for remittances or opening account with initial deposti of Rs50,000 and above.

Hope this helps.


In Reply to MDT 4 years ago

My query is not about opening of account. For remitting Rs. 50000 one needs to take a PAN Card (including purchasing a draft) . Why a person who does not have a taxable income should be forced to take a Pancard, if he can produce Ration card or voters identity to prove his identity. ?

Sucheta Dalal

In Reply to Dev 4 years ago

Your question is indeed valid, but the simple answer is because the RBI/ govt says so.

Frankly, I believe it is not about identity proof, its about the government treating everybody as a tax evader unless proved otherwise. Especially anyone who has more than Rs10,000 in a poor country like ours. So if you have 50K -- 5 times more, they want to be able to create a trail to verify whether you are falsely avoiding tax.
Sad isnt it? But do read some of our cover stories (by Ameet Patel) on how the Tax collection mechanism has been perverted to make is all work as tax collectors for the government on pain for crippling penalties -- that too free of charge. And all the while, being under suspicion that we are not doing a good job!


In Reply to Dev 4 years ago

for remitting cash (an amount of Rs. 50,000/- or more) one must provide his PAN number. Is it legal?

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