To make the reverse mortgage facility more attractive for senior citizens, the government has decided to a give a tax break on the instalments earned by pledging residential property. Annuity on reverse mortgage is henceforth tax exempt, National Housing Bank chairman and managing director RV Verma said. The revised scheme will enable a person above the age of 60 years to avail monthly payments from an insurance company as annuity for life against the mortgage of his/ her house while remaining the owner and occupying the house. As per the scheme, on the borrower’s death, or on the borrower leaving the house property permanently, mortgage is repaid along with accumulated interest, through sale of the house property. The borrower, or heir, can also repay the loan with accumulated interest and have the mortgage released without resorting to sale of the property.
State Bank of India has been directed by The East District Consumer Disputes Redressal Forum (New Delhi) to pay Rs1 lakh to a man for raising a demand of over Rs3 lakh from him towards credit card dues even though he had not availed the facility. The Forum noted that the Bank acted ‘irresponsibly’ by raising the illegal demand and putting the name of the complainant in CIBIL’s defaulter list which, in turn, resulted in denial of a housing loan to him, apart from tarnishing his reputation.
Does the second financial inclusion committee appointed on 23rd September render the Dr Chakrabarty Committee practically irrelevant and redundant?
I had previously argued that the Reserve Bank of India (RBI) should disband the new committee on financial inclusion, that was appointed on 23 September 2013, for various reasons outlined in previous Moneylife articles. It is also a month since the first Moneylife article came out, and there has neither been any clarification from the RBI nor any action on the lines that Moneylife had suggested.
When the country is struggling for resources, I am not sure that it is a great idea to have two independent committees on the same topic of financial inclusion at the same institution, especially when the larger mandate and the terms of reference of both committees are very similar. After all, the job needs to be done and it does not matter which committee does the work, so long as the mandate is achieved! In fact, imagine the spectre of two different committees on financial inclusion at RBI coming out with very contradictory recommendations—it would become totally counterproductive and an administrative nightmare on whose recommendations to accept and why!
So, I feel that the time is now ripe for the Dr KC Chakrabarty headed financial inclusion committee (appointed in 11 October 2012) to resign en masse so that the Dr Nachiket Mor chaired concurrent financial inclusion committee (appointed on 23 September 2013) gets a free reign to pursue its mandate in a comprehensive manner. I am sure that the respected governor of the RBI, the deputy governors’ and independent board members of the RBI will agree on the need to save scare resources (at a time of economic crisis such as this) and not have two high powered committees on the financial inclusion working concurrently at the RBI!
Two other points deserve mention.
First, the Dr KC Chakrabarty Committee consists of several members of the Central Board of Directors of the RBI – namely, YH Malegam, Prof Dipankar Gupta, Ela Ramesh Bhatt, along with well known experts like Prof MS Sriram (independent researcher & adjunct professor, Indian Institute of Management, Ahmedabad and Indian Institute of Management, Indore), RS Sharma (director general, Unique Identification Authority of India—UIDAI), B Sambamurthy (director, Institute of Development & Research in Banking Technology -IDRBT), Rama Vedashree (vice president, NASSCOM and member of NABARD's advisory board on Financial Inclusion Fund and Financial Inclusion Technology Fund) apart from the chairman, Indian Banks' Association and secretary, Department of Financial Services, Government of India. This certainly makes the Dr Chakrabarty Committee a very high powered committee.
And the above composition of the Dr Chakrabarty Financial Inclusion Committee raises some very interesting issues for corporate governance at RBI, which I leave to the Moneylife readers and general public, RBI board and the committee members and other stakeholders to ponder:
Let us set the record straight. The matter concerned is not something that can be treated lightly. A very high powered LIVE committee chaired by a very senior deputy governor of the RBI and comprising of several RBI board members, secretary of the Department of Financial Services and renowned outside experts has been effectively sidelined!
And without any doubt, if the independent non-executive members of the RBI board keep quiet and ignore this serious matter, then, one would have no option but to come to the (disastrous) conclusion that the board of the RBI is indeed a rubber stamp board with very little independent thinking!
A second and final point is also in order. Given that the Dr Chakrabarty Financial Inclusion Committee comprises of legitimate stalwarts in several respective fields, I wonder whether any of them felt a genuine need to resign voluntarily from the Dr Chakrabarty Financial Inclusion Committee that has become completely redundant NOW!
(Ramesh S Arunachalam has over two decades of strong grass-roots and institutional experience in rural finance, MSME development, agriculture and rural livelihood systems, rural and urban development and urban poverty alleviation across Asia, Africa, North America and Europe. He has worked with national and state governments and multilateral agencies. His book—Indian Microfinance, The Way Forward—is the first authentic compendium on the history of microfinance in India and its possible future.)