NPA Clean-up Off to a Poor Start
Indian banks, particularly the public sector banks (PSBs) including SBI and its associates, have been victims of very high non-performing assets (NPAs) and other distressed assets camouflaged as restructured assets. The malaise has been compounded by the extremely slow legal process for recovery. PSBs’ gross NPAs and restructured assets stood at dangerous 18.5% of total loan outstanding as on 31 March 2017 (see graph on the next page). The asset quality is deteriorating rapidly, as is evident from worsening of  asset quality indicator (AQI) of the Reserve Bank of India (RBI), from 0.68 in March 2016 to 0.90 in March 2017. This calls for drastic measures to avert a banking crisis. Towards this end, the seven-point 
 
Indra-dhanush framework for revamping PSBs was announced in 2015. However, after adoption of the easier part, the framework has been forgotten and NPA resolution under the Indian Bankruptcy Code, 2016 (IBC) is being treated as a panacea. 
 
Robust Legislation
Under IBC, the process to fix financial distress has to be mandatorily completed in a maximum of 270 days after admission of an application by National Company Law Tribunal (NCLT) for insolvency resolution, failing which, the corporate debtor has to be necessarily liquidated. The creditors can practically decide to liquidate the company in less than two months of admission of the insolvency application. In other words, certainty and speed of resolution through restructuring or liquidation is the hallmark of IBC, unlike previous credit recovery legislations. 
 
 
While the financial creditors can file for insolvency resolution under Section 7 of the IBC, the operational creditors and the corporate borrowers can file under Section 9 and 10, respectively. Upon admission of the application, the borrowing company’s board of directors is suspended and the control passes on to the insolvency resolution professional who must execute the mandate in terms of IBC and under the guidance and supervision of the committee of creditors (COC). The resolution professional, initially, joins as interim resolution professional (IRP) for 30 days and, thereafter, may continue as regular resolution professional (RP) or be replaced by the COC. While the COC drives the decisions about the restructuring or liquidation, the adjudicator’s role is limited to compliances with the provisions of IBC and dealing with questions of law. 
 
Hence, this legislation will not degenerate like Sick Industrial Companies Act (SICA), The Recovery of Debts Due to Banks and Financial Institutions Act (RDDBFI) and The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI) each of which had created endless delays.
 
IBC: Restructuring / Liquidation
Under IBC, the IRP/RP in control of the company’s operations must protect and preserve the value of the property of the corporate debtor and manage its operations as a going concern while he presents two major deliverables for insolvency resolution. The first deliverable is the information memorandum (IM) under Section 29 of the IBC and Clause 36 of Corporate Insolvency Resolution Process (CIRP) regulations. The IM is expected to carry complete details of the financial position, operations, shareholding pattern, company’s guarantee obligations, litigations and other relevant information. 
 
The second deliverable is the resolution plan (RPlan), which the RP must catalyse through transparent bids for submission of RPlans under Section 30 of IBC by the resolution applicants (RAs). Efficient due diligence by RAs can be facilitated by comprehensive and credible IM which must go beyond the mandatory requirements in terms of IBC and CIRP, and make time and data available to the bidding RAs for efficient due diligence. If the RP does an efficient job, the process can lead to rigorous bidding and acquisition of the corporate entity by an RA, and maximised recovery for the lenders. In spite of catalysing significant interest of the RAs, if an acceptable RPlan does not emerge, COC can liquidate the assets, with RP acting as liquidator. Since the RP works under COC’s supervision, the liquidation process is also speedy. As IBC in India focuses on competitive bidding, Section 30 auctions can also catalyse acquisitions from operating buyers and financial investors. Since auctions of NPAs under 15:85 structures to asset reconstruction companies (ARCs) have tapered down, it is expected that, for survival and growth, ARCs would be in fray with competitive RPlans to take over the distressed assets. 
 
The major challenges in IBC process are: how the IRP/RP can ensure that the operating unit continues with normal operations, understand the business and catalyse an optimum RPlan. Acquisition entails rigorous due diligence and bottom-up analysis by the bidders. To make the auctions within statutorily limited period of 180-270 days under IBC successful, the RP must display the skill and speed comparable with that of an investment bank. The skill requirement increases exponentially with the size of the corporate creditor. Limitations of RP can result in adoption of the process for its sake and acceptance of sub-optimal RPlan. The process is likely to see significant change, based on experience.
 
Banks’ Response to IBC
As the IBC process is time-bound and under COC’s control, banks were expected to adopt IBC enthusiastically. However, the banks’ response to IBC has been muted. 
 
So far, seven benches of NCLTs have disposed of 22 applications (Section-7: 13, Section-9: 8 and Section-10: 1) for an amount of Rs14,423.60 crore, 97.5% of which is accounted for by two financial institutions which were not banks. RBI’s guidelines for 100% provisioning on IBC-driven accounts in two years causes disincentive for banks for the adoption of IBC for new NPAs. However, there is no such disincentive for NPAs that are two or more years old. Yet, banks do not seem to have adopted IBC enthusiastically due to low liquidation values expected under the IBC process and the resultant provisioning for the entire asset shortfall, aside from possible accountability issues. No wonder, an ordinance amending Banking Regulation Act, 1949 was passed in May 2017 authorising RBI to issue directions to banks for the speedy resolution of distressed assets or adoption of IBC. 
 
Simultaneously, RBI’s circular of 5 May  2017 laid strong emphasis on banks adopting restructuring under the existing RBI schemes within the prescribed timelines, or face penalty. 
 
IBC Restructuring: A Double-edged Sword?
Will such moves work? Resolution of distressed account entails trimming liabilities to a serviceable level so that operations remain financially viable. The critical parameter which separates restructuring from liquidation is the difference between the restructured loan amount over the estimated liquidation value of the assets, and the sacrifice that the lenders are willing to make. The extent of lenders’ acceptable sacrifice in restructuring has been left to the empowered group of banks for corporate debt restructuring (CDR) and corrective action plan (CAP) structures under joint lenders forum and other structures introduced by RBI periodically since 2002 when CDR was introduced.
 
But CDR/CAP have largely failed. This was due to the inability of promoters to meet restructuring parameters. The recent schemes, viz., strategic debt restructuring (SDR), introduced in June 2015, and scheme for sustainable structuring of stressed assets (S4A), introduced in June 2016, have also failed, since the distressed companies did not have sustainable debt of even 50% prescribed in the schemes. This establishes recoverability of less than 50% of the loan. IBC is free from such parameters and can even provide for waiver of past and future government dues in terms of clause 
 
37(1)(j) of CIRP regulations. This flexibility and accent on competitive RPlans has the potential to catalyse optimum price discovery and give to the lenders the maximum possible recovery, notwithstanding significant write-offs. The key, however, lies in transparent and competitive bidding by multiple RAs. Restricted and opaque bidding can induce the corporate borrower’s moral hazard and result in heightened losses to the lenders.  
 
Will the sale under IBC improve recoveries from NPA significantly beyond the current 10.3% (see graph)? It is a matter of months before the figure emerges with the resolution of 12 large accounts, with total debt of Rs2.50 lakh crore (25% of gross NPAs), put under IBC. If the solitary NCLT RPlan of Synergies Dooray Automotive Limited approved by NCLT in August 2017 is a precursor to NPA recovery levels from IBC process, it is worrisome for the banking sector. Let’s see the astounding features of Synergies RPLan.
 
Synergies Dooray made an application to NCLT Hyderabad under Section 10 of the IBC. RPlans under Sction 30 of IBC were submitted by the three RAs The COC composition as formed by the RP and accepted by NCLT was as follows:
 
 
The COC rejected the RPlans of the first two RAs and accepted that of SCL, a promoter group company. The RPlan involved payment of a small fraction of the debt outstanding.
 
In effect, the RPlan delivered to secured lenders just 4.8% of the debt outstanding. As a precedent, this is very damaging to banks. EARC contested the classification of MFL as a financial creditor and abstained from voting at the COC meeting which accepted the RPlan with 90.16% vote. EARC argued that the loans from five banks bought over by SCL were assigned to MFL through three assignment deeds. Since SCL was a related party, the debt assigned by it to MFL could not be treated as financial credit (this was not akin to assignment of receivables in normal course of business). Besides, even the assignment deeds were not executed as per the law, since the assignee (which had a paltry paid-up capital of Rs65.94 lakh as on 31 March 2016) had not paid consideration for the assignments. NCLT rejected EARC’s appeal on 2 August 2017. EARC has appealed. Interestingly, the RPlan allowed netting of MFL’s unpaid assignment value of Rs37.91 crore against interest-free instalments for three years after a one-year moratorium. Let’s look at what this means.
 
 
A buyer of non-performing loan expects a significant return from such risk-proven assets and would price them at the present value of anticipated cash flow discounted at the required rate of return. Assuming a modest required return of 20%pa, the present value (PV) of the above-mentioned cash flow to MFL works out to just Rs24.98 crore, only 66% of the assignment value of Rs37.91 crore. In other words, MFL accepted an RPlan with huge loss within months of executing assignment deeds. However, this loss is notional, since the receipts by MFL were to be fully netted with his payables in terms of the RPlan. So, the debt assignment to MFL reflected zero, or negative, consideration, having regard to the transaction costs.
 
Following EARC’s objections, the RPlan has been reportedly modified and requires MFL to pay the debt assignment value first and recover later in terms of RPlan. In such a case, based on discount rate of 20%pa, the PV of receivables works out to around Rs29 crore reflecting a loss of Rs8.92 crore to MFL within months of the transaction. It is inconceivable that a finance company will settle for such losses without a murmur sans a sweetheart deal to compensate for such accommodation through a carefully structured invisible deal. 
 
IBC is of help to genuine as well as crooked corporate debtors. Where there is a likelihood of a significant asset shortfall, banks have no incentive to adopt IBC. In such cases, for a promoter whose account has turned non-performing due to factors beyond his control, IBC provides a vehicle for speedy discharge. IBC permits avoidance of undervalued or extortionate credit transactions up to two years preceding the insolvency commencement date. A crooked promoter, who has done such transactions earlier than two years, can adopt IBC for a speedy exit or continued control with substantial haircut by banks.
 
The role of RP is, therefore, crucial for maximising value for the banks from the distressed assets. The Synergies matter, as and when disposed of, would set a precedent for the transparency and quality of transactions, and conduct of intermediaries and COC, etc. A look at some of the advertisements inviting RPlans shows opacity in the process to thwart competition. This would mean banks living with the same promoters or their proxies with maximum haircut or head-cut! If that is the case, a robust legislation like IBC will be undermined.
 
 
India has the dubious distinction of being the slowest in credit recovery as is evident from World Bank study (See graph Average Recovery Time). This has resulted from extremely tardy process in SICA (Sick Industrial Companies Act) /BIFR (Board for Industrial and Financial Reconstruction) since repealed, and RDDBFI and SARFAESI Acts. With creditor-driven IBC, India is expected to substantially improve the recovery duration. While this will minimise asset impairment and enhance recovery, it cannot improve the inherent asset quality, since low NPA recovery of PSBs is primarily due to asset overstatement which has often come to light in the past. 
 
It is unlikely that the Synergies recovery figure would prove to be an outlier. My sense is that IBC will speed up and may improve the recovery significantly, it will not resolve the NPA problem which has resulted from PSBs’ management and organizational inadequacies Assuming an optimistic recovery of 22% (FY12-13) from NPAs and restructured assets of Rs11.50 lakh crore as on 31 March 2016, the government will have to recapitalise PSBs by Rs8.97 lakh crore in short to medium  term due to growing NPAs, notwithstanding provisionings. How will the epoch-making IBC reduce this? To save banks from the coming crisis, it is necessary for the government to go beyond IBC urgently, even as it tries to plug attempts to game it. To begin with, the government should immediately implement PJ Nayak committee’s recommendations by professionalising PSB top management and boards, apart from reducing the government stake below 50%, and removing compensation and operational constraints. Subsequently, PSBs must be privatised. Right now, the policy-makers and investors are complacent that the IBC will speedily shrink the mountain of NPAs and also prevent a growth of bad loans. This may be misplaced optimism with dangerous consequences.
 
Bankruptcy Resolution: Global Experience
In the paper, titled “Cashing Out: The Rise of M&A in Bankruptcy”, Stuart Gilson, Edith Hotchkiss, and Matthew Osborn studied a large sample of 350 filings for Chapter-11 bankruptcy protection in USA during 2002-2011, significant acquisitions under bankruptcy auctions (table-1).
 
Overall, 52.6% of the companies sold some or all the assets for cash, indicating significant role of mergers & acquisitions (M&A) in Chapter-11 process. The auctions  involved multiple biddings. The secured creditors catalysed the asset sale and use of M&A, particularly for the going concerns in many cases. Secured creditor recoveries often exceed 50% in USA.
 
Under the UK bankruptcy code, 50% of the distressed companies were sold as going concerns and over 40% liquidated piecemeal. The liquidation process gets concluded in about 1½ years and delivers, to the lenders, recovery of about 75%, with recovery cost of about 15%, of the asset value. Overall, 75% of the distressed assets undergo bankruptcy and the rest are restructured, reflecting the lenders’ preference for restructuring viable businesses. India’s situation was among the worst.

(Mr Gantra is a registered insolvency resolution professional, restructuring consultant and visiting faculty for MBA)

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    COMMENTS

    Sandeep Kotwal

    2 years ago

    There is hardly any attempt to understand the root cause and the process to eliminate it. It's only financial jugglery being put to use. There might be some process issues in the business operations flow, project management issues, people issues ....
    Unless all these are factored appropriately, the problems might continue for ever....

    REPLY

    Mukund Rajamannar

    In Reply to Sandeep Kotwal 2 years ago

    Well said. For some reason, the law makers pretend to be completely oblivious of this fact.

    Sridhar Rao

    2 years ago

    As always the smart borrower/defaulter will try to game the system and it is to be seen how the law holds up.

    Rajendra Ganatra

    2 years ago

    Superb!

    RBI Shocker: Internal Ombudsman is for banks and not for customers
    In an astonishing disclosure, the Reserve Bank of India (RBI) has said that its much-touted Internal Ombudsman (IO) or his details do not need to be disclosed to the consumer. The IO can only be approached by the bank, which will make a representation without any obligation to inform the consumer. The scheme details, which were obtained by Moneylife  under the Right to Information (RTI) Act is fully of contradictions, lacks transparency and disclosure and seems like yet another hurdle to quick grievance redress for the consumer.  Unfortunately, this is sanctioned by the regulator. It is no wonder then, that even the new regulations by the RBI to protect against digital fraud get better results from consumer courts than from the RBI. 
     
    Here is what the RBI actually says: "Arrangement of Internal Ombudsman is internal to the bank and there is no requirement for the complainant to access IO. RBI has advised banks to internally escalate all cases to IO for final decision where either the complaint is rejected or only a partial relief is provided to the complainant".
     
    In response to our RTI query, the RBI has informed that  34 banks including, 26 public sector banks (PSBs), five private banks and three foreign banks have appointed IO. It has provided a list of names, which is attached below. 
     
    The operating procedure of the Internal Ombudsman is spelt out in a “communication”, but its official sanctity is not clear. The RBI is emphatic at the IO “is internal to the bank and there is no requirement for the complainant to access the IO.  RBI has advised banks to internal escalate all cases to the IP for final decision where either the complaint is rejected or only a partial relief is provided to the complainant”.  
     
    The RBI further says that the “final communication to the complainant shall mention that the complaint has been examined by the IO and still if he is not satisfied, he can approach the BO i.e. level VI”.  So far, we have not come across any complaints where there is such a communication about reference to the IO.  In fact, most complainants are in the dark about action taken. What is worse, the very sanctity of this ‘advise’ is unclear, since the RBI’s communication to banks’ does not seem a part of the master circular of the RBI, which has strict implications. 
     
    Point 4.1 of the IO scheme, says that the “IO shall facilitate resolution/settlement/agreement of such grievances through conciliation and mediation between the Bank and the aggrieved part or by passing an Advisory in accordance with the scheme”. However, if the RBI itself has allowed banks not to communicate with the consumer, nor spelt out a process for this mediation and conciliation, it is unclear how a consumer will be approached at all. Again, we have no record of any consumer having had the benefit of action or mediation by an IO. On the contrary, they have had more success with the consumer courts. 
     
    The scheme further says that the IO should ‘take into account the evidence placed before him by the parties'. However, the consumer seems to have no say in ensuring that all evidence is actually submitted to the IO. In fact, one senior citizen bank customer is running from pillar to post for his complaint of money fraudulently transferred from his savings account with a prominent bank. His communication, seen by Moneylife, nowhere shows if this is being escalated to the IO level.  This senior citizen managed to lodge a complaint with the Police, and has virtually been shut out by the bank, despite going through Moneylife Foundation, an NGO. The plight of other consumers is likely to be worse. 
     
    The RBI with regard to the IO Scheme, says that if the customer" is not satisfied with level 5 or the IO level, then she can approach the BO at next level (level VI)”. This communication itself is proof of the extraordinary harassment that a consumer is subjected to through official sanction by the RBI.  Why should a consumer have to wade through six levels of filing complaints, with endless delays at each level? Since the RBI has flatly refused to impose punishment on banks for such harassment, it is no wonder that banking related disputes either get resolved in consumer courts or simply languish. 
     
    In 1995, the Reserve Bank had introduced the Banking Ombudsman Scheme to provide an expeditious and inexpensive forum to bank customers for resolution of their complaints relating to deficiency in banking services provided by commercial banks, regional rural banks and scheduled primary co-operative banks.
     
    The communication issued on 18 August 2016 , when Dr Raghuram Rajan was the Governor, changed nomenclature of existing Chief Customer Service Officer (CCSO) to IO. The escalation mechanism stated in the communication kept IO at level 5, preceded by Branch Manager at level 1, Circle Office at level 2, Zonal Head at level 3 and Principal Nodal Officer at level 4. If the customer is not satisfied with the IO decision, she is required to approach the Banking Ombudsman at level 6, appointed by the RBI. 
     
    While the communication states that customer is not required to approach the IO directly, it allows the IO to facilitate resolution between bank and the customer. It says, "The IO shall facilitate resolution/ settlement/ agreement of such grievance through conciliation and mediation between the Bank and the aggrieved party or by passing an advisory in accordance with the Scheme."
     
    In its press release issued on 11 May 2015, the Reserve Bank had stated, "The bank’s internal ombudsman will be a forum available to bank customers for grievance redressal before they can even approach the Banking Ombudsman."
     
    Here is the reply received from RBI on Internal Ombudsman…
     
     
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    COMMENTS

    Sisir

    2 years ago

    As such, the current BO scheme itself is ineffective, with some BOs colluding with banks and do a disservice to the aggrieved customers. An IO would ensure that it is more absurd. Unless SC reviews the functioning of RBI and those powerful banking laws of India, showing middle finger to natural justice and rule of law by RBI as an accomplice of banks would continue.

    REPLY

    Pradeep Kumar M Sreedharan

    In Reply to Sisir 2 years ago

    Alibaba and 40 thieves. And in the shadows of PSU Banks, the real Banksters are reaping a rich harvest, unnoticed by anyone

    Pradeep Kumar M Sreedharan

    In Reply to Pradeep Kumar M Sreedharan 2 years ago

    HDFC to me is a foreign bank, and to me it is yet another East India Company

    sohan modak

    2 years ago

    sick !

    A BANERJEE

    2 years ago

    Is RBI a state within the state?

    Ramesh I

    2 years ago

    Of late PSBs have been fleecing regular customers on the pretext of higher costs, while it's actually a case of robbing Peter to pay Paul. The classic example of how SBI Chairperson publicly acknowledged that it costs SBI a lot to maintain JDY A/cs, and hence it has raised the MAB for regular customers substantially. Long-time "Regular" customers like myself wouldn't grudge the higher MAB, if PSBs like SBI also enhanced their service levels for us, but that's not the case at all. I am surprised no one has filed a PIL to prevent PSBs fleecing a section of customers like this (though our citizens have time to file PILs on more important matters like Santa-Banta jokes being 'offensive', etc.). Wish we had a law which ensured timely service delivery by all Govt Depts. and PSUs - all of who survive on taxpayers' money. The Banking system needs to be much more fair and transparent for millions of people out of its ambit to have faith in it.

    Vijay Bapat

    2 years ago

    And we thought Raghuram Rajan was a good guy?

    Doesn't the plight of the honest tax paying middle class remind one of the silence of the lambs?

    Pradeep Kumar M Sreedharan

    2 years ago

    Piecemeal solutions maybe avoided.
    We need a consumer commission, in the lines of the election commission
    Nothing else will suit.

    ksrao

    2 years ago

    Let the banks have the luxury of an IO for internal purposes. They must and should have another independent authority to look into customer complaints, pursue them and settle the grievances to the satisfaction of the customer. Otherwise the present method is just a farce, under the garb of internally examining customer problems.

    parth pushkar

    2 years ago

    IO is an additional layer for examining the partially rejected or rejected complaints. IO is not related to concerned deptt. All letters to complainants for rejected and partially rejected claims have to incorporate that they have been examined by IO.
    There is RBI ombudsman to examine all such cases which has been rejected or partially rejected.
    And there is a deptt within rbi to look all non rbi-ombudsman cases.
    Not saying that customers are not harassed but as a system you can't blame internal ombudsman is a shocker.
    Internal means internal to banks.
    I think the heading is a shocker.
    Not expected from moneylife. Yellow journalism.

    REPLY

    Sucheta Dalal

    In Reply to parth pushkar 2 years ago

    You need to check your understanding of what is Yellow and what is the meaning of grievance redress - as well as the declared history of RBI's plans to set up an IO. What is INTERNAL TO THE BANK ABOUT A CUSTOMER COMPLAINT? Is the CUSTOMER INTERNAL TO THE BANK AND ITS CORE STAKEHOLDER OR OUTSIDER? WHY SHOULD INFORMATION ABOUT THE IO AND HOW THINGS ARE ESCALATED TO THE IO BE HIDDEN FROM THE CONSUMER??
    If you are a banker, or have lobbied for this one-sided policy, make an open declaration of your interest, instead of calling us names.

    parth pushkar

    In Reply to Sucheta Dalal 2 years ago

    Why do you want 2 layers of ombudsman to do the same thing? I fail to understand.
    I am with you on grievance redressal mechanism failures. But as a system structure certainly I disagree.
    I m a fan of yours but truth must be told

    Sucheta Dalal

    In Reply to parth pushkar 2 years ago

    A fan who alleges yellow journalism at the first thought is someone we can do without. NOBODY WANTS TWO LAYERS OF OMBUDSMAN. That is the RBI's regressive move and lazy action to avoid decisions by their own Banking Ombudsman. Having done it, the least they should have done is ensure full transparency -- PLEASE NOTE THIS INTERNAL OMBUDSMAN IS THE FIFTH LAYER. in any case, not going to engage with you since it is clear that you have a vested interest or are uninformed and intemperate. Have a good life.

    Deepak Narain

    2 years ago

    It is anti-consumer and very unfortunate.

    Gitesh Shah

    2 years ago

    Person whose pay cheque is dependent on the bank and not on the customer will tend to take side of the bank. How it can be? Banks should pay some money to setup and independent ombudsman body governed by RBI.

    Pradeep Kumar M Sreedharan

    2 years ago

    Banana republic

    Kartik Swaminathan

    2 years ago

    Atleast, there should be some position of authority with whom we can speak before reaching the Ombudsman. More than direct access, transparency of response, tracking, action taken and relief provided to consumer must be the focus. So, as a first step lets first know the number of complaints escalated to these internal ombudsman and how many of them have been resolved in interest of customers and how many were rejected and why.

    Now, RBI Staff Start Complaining about SBI’s Charges!
    Poor retail consumers trying to draw the attention of regulators about extortionate banking service charges now have an unlikely ally: employees of the Reserve Bank of India (RBI)!
     
    Banks have been increasing the penalty and other charges on customers -- because the RBI’s regulations give them a free hand to do so. They do not need the permission of the RBI to levy on customers. This gives the veneer of competition in a sector where switching costs are high. This is now hitting the staff of RBI as well. The All India Reserve Bank Employees Association (AIRBEA) is seeking RBI Governor's intervention on charges and penalty levied by State Bank of India (SBI) on account holders.
     
    Samir Ghosh, General Secretary of AIRBEA, in a letter to RBI Governor Dr Urjit Patel, has said, "We are being constrained to draw your kind attention to certain recent business decisions of the country's largest bank SBI like withdraw cash only three times a month free of charge and fine failure to maintain balance."
     
    "We urge that Section 35A of Banking Regulation Act, 1949 do empower Reserve Bank to give directions to prevent the affairs of any banking company being conducted in a manner detrimental to the interests of the depositors," Ghosh had said in the letter.
     
    Highlighting the apathy of small depositors, the employees union says, for savings bank accounts held in metro branches, the required minimum average monthly balance is Rs5,000, and if the amount falls below Rs3,750, SBI levies a penalty of Rs100 plus service tax. The charges and minimum account balance vary across metro, urban, semi-urban and rural areas. According to reports, during the June 2017 quarter, SBI had earned Rs235 crore only from such fines, which goes directly to its net profit. 
     
    Moneylife Foundation has been at the forefront of speaking up for bank customers. Earlier, on 4th July, thousands of people joined the unique #TweetMorcha against arbitrary bank charges, with the hashtag #BankSeBachao trending at top spot in India and also featuring in worldwide trends that afternoon. People from across the globe sent tweets to @NarendraModi and @ArunJaitley with the hashtags of #BankSeBachao and #TweetMorcha. 
     
    An online petition launched by us on Change.org has garnered more than two lakh signatures. (Sign the Petition). One of the key points of the petition is about unreasonable and unfair bank charges. "Frequent increase in charges and billing customers by stealth through opt-out clauses that are not noticeable must be stopped immediately. For e.g. HDFC Bank started levying charges for an invite-only program, which unethically assumes that the customer is already in and willing to pay for it. The levy is stopped only when the consumer notices it and calls the bank to protest; this too is not an easy process," the petition says.
     
    With RBI’s own staff now raising issue of unfair charges levied by SBI, it is high time that the regulator wakes up to ground level reality and take necessary action against such practices. 
     
    Earlier on 12 May 2017, a group, including well known NGOs, trade unions, finance editors and experts, presented a 1,100 page printout of over 100,000 signatures to an online petition at Change.org to M Veerappa Moily, Chairman of Parliamentary Standing Committee on Finance.
     
    The Moneylife Foundation Campaign has certainly ruffled several feathers at the Reserve Bank as can be seen by some decisions taken by the regulator. This includes limiting customer liability, asking banks to share details of transactions in passbook or statements, expanding the role of the Banking Ombudsman. However, there is so much more that the Reserve Bank needs to do, like making its Consumer Charter more effective and effectively curtailing the practice of mis-selling and unfair service charges.
     
    SBI have a network of about 24,000 branches (post merger of associate banks with SBI) and more than 40 crore customers of which 31 crore have savings bank accounts.    
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    COMMENTS

    VIMAL KUMAR

    2 years ago

    New rule by SBI..."The account holder must come personally to the bank to withdraw cash
    if they want to use card swiping facility located at the cash counter". others must use the ATM machine . The idea is , after the implementation of number of cash withdrawal limit in ATM more people started using the card swiping facility. In villages and small towns ,normally woman and old /sick people send their children with atm cards for bank transactions.If they use the counter facility it is not chargeable whereas ATM withdrawal is chargeable. 'WHAT AN IDEA SETHJI'''''

    Gupta

    2 years ago

    Somebody has to pay the bills of corruption i.e. read NPAs. These 100 rupees each is what they hope will fill the hole of NPA losses of lacs of crores created with impunity during the previous govt's misrule

    REPLY

    Shirish Sadanand Shanbhag

    In Reply to Gupta 2 years ago

    I fully agree with your view.
    What best we can do to bring the SBI charges at par with earlier days.

    Gupta

    In Reply to Shirish Sadanand Shanbhag 2 years ago

    Protest and support Moneylife.... or simply close your SBI accounts. That's all that we can do.

    gvn rojarao

    2 years ago

    SBI chairman is against to small deposit holders she suking to small investors money by way of hidden charges, please stop this robbery.

    REPLY

    Shirish Sadanand Shanbhag

    In Reply to gvn rojarao 2 years ago

    SBI's Chairperson is just a show piece doll.
    If our finance minister is sensible, then he can bring the SBI's unethical bank charges to its normal earlier charges.

    Gupta

    In Reply to Shirish Sadanand Shanbhag 2 years ago

    He certainly can, but it is worth thinking whether he should? Should a Fin Minister of a country be spending his time on deciding 100 rupee min bal charges that banks should charge or not charge? Has he got nothing better to do?

    A BANERJEE

    2 years ago

    It is doubtful if RBI acts on this also. Why the MoF is silent is another mystery.

    REPLY

    Shirish Sadanand Shanbhag

    In Reply to A BANERJEE 2 years ago

    MOF is not interested in Bank's customer services issue.
    For him Acche Dins have already come, till year 2019.

    Gupta

    In Reply to Shirish Sadanand Shanbhag 2 years ago

    We Indians get a sense of satisfaction in critising the Govt for every damn thing in the world. Why do you think Govt should intervene or even look at this matter when SBI has its Board and there is a body called RBI in existence?

    Sucheta Dalal

    In Reply to Gupta 2 years ago

    It is the job of the finance ministry to ensure that regulators are accountable. Over the last decade this has gone for a toss. So yes, it is our right and our duty as citizens to HOLD our elected representatives accountable -- not for "every damn thing" as you seem to imagine -- but for things that are directly within their domain and a reflection of their failure to demand and ensure accountability. This applies not merely to RBI, but even more to IRDAI and SEBI. And yes, we will ONLY hold elected representatives accountable for it -- that is why we have put them in parliament with all the perks and privileges!

    Gupta

    In Reply to Sucheta Dalal 2 years ago

    That is a perspective which i respect but I beg to differ. There has to be segregated roles and responsibilities to ensure priority of issues does not suffer and Govt is not micromanaging. RBI is an arm of Govt and should be responsible here. Govt cannot and should not poke its nose on such matters. They can / should review RBI's performance on various metrics at high level but not get down to giving directives at transactional level.

    majad

    2 years ago

    SBI has debited Rs 59.00 from my SB a/c stating that " Fee Excess DRS ".What is DRS?

    REPLY

    Mrinal Thakkar

    In Reply to majad 2 years ago

    all banks have a certain number of debits per quarter which they allow , above that , they will charge you , present with all banks especially in lower AMB accounts . its best to ask your bank manager abt the limit.

    Ramesh I

    2 years ago

    Just as the Govt makes scapegoats out of middle-class salaried taxpayers to fund its grandiose 'welfare schemes' (including to illegal immigrants from Bangladesh and Rohingya Muslims from Myanmar now, many having the ubiquitous Aadhar Card !), PSU Banks have started fleecing regular S.B. A/c holders to fund its JDY A/c maintenance costs and also pay hefty salaries to its inefficient laidback staff. RBI has failed as a regulator to protect the interests of common Bank customers, though it has a Dy Gov who is supposed to address consumer grievances and improve service levels in PSU Banks.

    B. Yerram Raju

    2 years ago

    The system does not recognize the account holder from the RBI distinctly to confer any favor.
    Kotak Mahindra Bank Ltd., that gives 6% on its premium SB account does not give either a Pass Book or statement of account even once in a quarter in the name of digital banking! On top, charges around Rs.400 if you ask for a statement!! This is service to the customer. It is a different issue that they reversed the charges when I threatened to close the account as closing account entails one time charge!!

    REPLY

    Mrinal Thakkar

    In Reply to B. Yerram Raju 2 years ago

    they send you email statements every month without fail , pls start taking a printout of it , and they do issue passbook. statements are also present inside your net banking account. I agree they have charges when you try to get physical statement from the branch

    Govinda Warrier

    2 years ago

    Interesting analysis and interpretation. Trade Unions in Government Establishments and PSUs have a tradition of taking up public interest issues. But, unfortunately, they used to get media attention only when public get disturbed due to strike calls or agitations with focus on wage related issues.The reason being, media is owned by private sector which is not comfortable with workers getting organized.

    ksrao

    2 years ago

    It is high time we rechristened SBI as Stout Bank of India, too fat to move fast.

    bharatkumar chandulal shah

    2 years ago

    recently i came across surprising procedure to credit cash in saving bank account at the bank branch counter, that requires your ATM card and enter your details including password .There was written notice board at the counter instructing the same. is it now regular procedure?

    REPLY

    bharatkumar chandulal shah

    In Reply to bharatkumar chandulal shah 2 years ago

    it is at SBI branch.

    Mrinal Thakkar

    In Reply to bharatkumar chandulal shah 2 years ago

    yes , many banks have cash deposit machines , in BOI though you dont need ATM card , just your account number is fine

    bharatkumar chandulal shah

    In Reply to Mrinal Thakkar 2 years ago

    yes, i appreciate the facility of cash deposit machines, but what i found , it is at manned window, where it requires ATM and entry by you. THEN WHAT IS THE PURPOSE OF THE STAFF EMPLOYED THERE?

    g k agrawal

    2 years ago

    A good initiative by Money Life. in the name of Deregulation of ground level conditionalities, SBI has become anti small depositors. RBI must intervene to protect interest of depositors.

    REPLY

    Mrinal Thakkar

    In Reply to g k agrawal 2 years ago

    only SBI is being highlighted , all banks levy charges similar to SBI , its just that SBI being the largest bank , many people having accounts and thus coming in limelight

    SuchindranathAiyerS

    2 years ago

    The child is the father of the man!!!

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