Our Money, Our Right: An Appeal to Political Parties for 2019 General Election
People’s movements, civil society organisations or non-governmental organisations (NGOs), trade unions and citizens concerned over finance and banking have made an appeal to all political parties to include a transparent and accountable financial banking system in their election campaign and manifesto. This appeal is published by Centre for Financial Accountability after consultation with all the concerned entities. 
 
The appeal  talks about issues like mounting non-performing assets (NPAs), demonetisation, proposed bank mergers, weakening of Reserve Bank of India (RBI), crippling the economy by introduction of goods and services tax (GST), charging the customers for basic banking services taxing them and pending wage revision for bank employees.
 
“These are only a few amongst the various ways in which the policy changes manifested, affecting not just the citizens, but the economy of the country, shaking the foundations of our financial system and public sector banks (PSBs). The upcoming general elections in 2019 will be crucial in many ways, particularly for the financial and banking sector. It will be an opportunity for political parties to commit to correct the past mistakes and take proactive initiatives to put systems in place for strengthening the sector and making it transparent and accountable,” the appeal says.
 
The appeal is endorsed by eminent activists like Medha Patkar (Narmada Bachao Andolan), CH Venkatachalam (All India Bank Employees Association- AIBEA), Thomas Franco (Former General Secretary, All India Bank Officers’ Confederation- AIBOC), Sucheta Dalal (Founder Trustee of Moneylife Foundation), Centre for Financial Accountability (CFA), Soumya Dutta (Bharat Jan Vigyan Jatha), Madhuresh Kumar (National Alliance of People’s Movements), Leo Saldanha (Environment Support Group), T Peter (National Fishworkers Forum), Ulka Mahajan (Sarvahara Jan Andolan), TR Bhatt (Former Chairman Corporation Bank Officers’ Organisation), Beyond Copenhagen Collective/ MAUSAM, Working Group on International Financial Institutions (WGonIFIs), Dunu Roy, Sreedhar Ramamurthy (Environics Trust), and several bank employee unions among others.
 
Here are the points raised in the appeal…
 
Whitepaper on Demonetisation
 
Demonetisation, which rendered 86% of the currency at the time of its announcement invalid, with announced objectives of unearthing black-money, stopping terror funding, abolishing corruption and checking counterfeit currencies, has imposed unaccountable miseries on people. With more currency in circulation than at the time of demonetisation, with over 99.3% demonetised currency returning to banks, with increased cases of counterfeit currencies, corruption and terror activities there is no evidence that the purpose of demonetisation was ever met. Yet, the unorganised (informal) sector, which constitutes country’s 83% of workforce was shattered. More than 100 people died due to hardships imposed due to demonetisation, over 100 cases were filed against people holding huge amount of fresh currency and few bankers (specially in private banks) of aiding hoarding of new currency. The only sector, which benefited from it seem to be the Fintech companies. The Parliamentary Standing Committee on Finance could not complete its enquiry because BJP MPs stalled the process.
 
After two years, it is very clear that demonetisation did nothing to achieve its stated aim, but on the contrary has destroyed a major part of the economy, that was a source of livelihood for the poor, lower and middle class.
 
We demand a whitepaper on demonetisation, capturing the economic and social costs and benefits of it. The purpose, objectives and the outcome of demonetisation require a public scrutiny, which we expect to happen through the whitepaper on it and its presentation in the Parliament.
 
Addressing NPA crisis
 
The central problem of the Indian banking industry is the piling of NPAs worth over Rs10 lakh crore, which have accumulated on account of faulty lending practices, which favoured Corporates. The RBI and the government chose to not intervene between 2008 and 2014, but rolled out a series of restructuring and readjustment policies, prompt corrective action that was not prompt, all of which contributed to intensifying the crisis.
 
Instead of timely and stringent actions on the defaulters, the RBI and the government policies focused on tightening the banks. From the restructuring policies, introducing Insolvency and Bankruptcy Code (IBC) that resulted in huge haircuts, merger of banks, attempts to privatise banks have only been detrimental to the banks and helped the defaulters. This shows the lack of political will to address the issue of NPAs in a fundamental way. Even the recommendations made by the Parliament Standing Committee in February 2016 are ignored.
 
We demand publication of defaulter lists, a transparent recovery measures, assets recovery procedures including attaching of properties and sale, along with a moratorium on wilful defaulters, companies and their offshoots, from accessing any fresh loan or restructuring.
 
We demand strict action against defaulters. Commercial banks should keep away from high risk lending and instead let a new development bank take the role of long term, high risk lending, as recommended by Standing Committee on Finance, in its report on the Banking Sector in India – Issues, Challenges and the Way Forward (May 2018), a comprehensive social and environmental safeguard policy to ensure the risks related to litigations and delays due to negative impacts on people and environment are mitigated are essential to fundamentally address the NPA crisis.
 
Strict Action Against Wilful Defaulters
 
More than 82 per cent of the NPAs are due to corporate defaulters. One third of that belongs to just 40 Corporates. The government and the RBI have not released the name of the wilful defaulters, nor has there been any actions against them. Even the list of written off accounts are not made public allowing them to cheat another bank. The PSBs should be empowered to take strict action against wilful defaulters, thereby recovering the bad loans and setting deterrence to the potential violators of loan terms in future. We demand that the names of the top 500 wilful defaulters should be made public. There has to be criminal procedures against the wilful defaulters.
 
Strengthening RBI
 
The destructive interference in the operations of key institutions was the hallmark of this government and the case of Reserve Bank of India was no different, jeopardising its independence. Using its Board as a rubber stamp to legitimise demonetisation was just one of them. Appointment of RSS ideologues at its Board only confirms the fear of turning critical institutions such as RBI as pawns of the government. Attempts to dig deep into RBI’s reserves to bolster its capital requirement to announce sops with elections round the corner exposes the myopic vision of systems and structures for economic stability. We demand complete political non-interference in the functioning of RBI and instead should take steps to strengthen its independence. Appointments to its Board should be made more stringent and transparent, based on experience and expertise rather than ideological leanings. Accountability should be fixed on RBI with stronger reporting system to Parliament and better transparency.
Political Interference in PSBs
 
The political interference in the functioning of public sector banks (PSBs) has promoted crony capitalism and corruption. This has resulted in mounting non-performing assets (NPAs) and the political patronage for certain corporations crippled banks’ will to recover money from the defaulters. We demand complete political non-interference in the operations of PSBs and incentivise prudent recovery of bad loans. Instead Accountability should be fixed on the Chairman, MD and Board of Directors.
 
Depositor Rights
 
In the history of Indian Banking, depositors of PSB have never been under such tremendous pressure like the last four years. With policies like demonetisation that resulted in a country wide chaos, the FRDI Bill that sent panic that depositors might loose their savings, the increased and huge charges on banking transaction and the eminent threat of bank privatisation has all contributed to many even closing accounts with PSBs.
 
As attempted in the failed FRDI Bill, depositors are now being made to be stakeholders for the losses of the banks. Hence, we demand that depositors should be empowered with full disclosure by the bank about investments of their deposits and the risks involved and mitigation plans. Depositor should have the right to assert not to invest in certain sectors, which are proven to be detrimental to humans and nature. Depositors should be provided with policies, which guide the investments of their bank. Banks should not impose charges on depositors for basic banking services.
 
Bank Charges
 
Service charges on banking services have increased drastically in the previous few years. Primarily, banks are in the loss due to increased non-performing assets and provisions needed for them. The loss has been caused by corporate defaulters but the burden of this loss has been shifted to common people in the form of increased bank charges despite the fact that these charges amount to merely 1% of the total amount of bad loans. Depositors are being charged for almost every banking service such as cash transaction at branches, ATM transactions, change in ATM pin code, change of mobile number or address, SMS alerts, changes in KYC related documents etc. The Government along with the RBI must come up with the clear guidelines for banks to stop charging customers for each and every banking service and take actions against real culprits who have caused the loss to banks.
 
Strengthening rural and agricultural credits
 
Agriculture is the backbone of our economy. Keeping this in mind, in the nationalisation era, PSBs had taken efforts to improve agricultural credit by having mandatory priority sector lending. Further the direct credit within priority sector also aided in the credit needs of farmers. But changes in such polices and including agro based industries for priority sector lending, has severely affected credit flow to the farmers.
After nearly three decades of economic liberalisation, farmers are worse off and indebted. There’s an alarming rise of debt in the farm sector. Banks having nearly withdrawn from rural and small agricultural credit, farmers were forced to approach informal credit sources, consequences of which was unfolding the past many years in the form of suicides of thousands of farmers.
We demand that farm loans of small, marginal and subsistence farmers should be written off. And banks should step in to support the sector with providing credits. Crop Insurance should be done by Public Sector Insurance Companies and not by private companies like Reliance.
 
Strengthen the devastated unorganised sector and small businesses
 
Demonetisation had the maximum impact on unorganised sector and small businesses. GST has made it only worse. They being the largest workforce in the country, contributing more than half of our GDP, priority should be given to the sector to rebuild and restore it. They require seed money for start-ups, Equity Support, Loans, marketing support and common support services.
 
Transparency and Accountability
 
‘Sunlight is the best disinfectant’. Absence of transparency and accountability at all levels of appointments and decision making has been fundamental to the cancer of crony capitalism, corruption, under performance, loss making and the monumental social and environmental costs, which the irresponsible investments are causing. We demand mandatory policies pertaining to transparency and accountability for all banks, including RBI, NABARD, SIDBI and Private Banks.
 
Banking Activities without Banking Licence
 
There are many Fintech companies, which are into lending which is a banking activity. There are no supervisory mechanism or Licence. They charge huge interest. They have to be immediately brought under RBI supervision.
 
Social and Environment safeguard policies
 
Large-scale development projects have been seen as imperative for the economic and social growth of the country. But, such projects have had adverse effects on the lives of people in project areas and also have done irreversible damage to the environment. The civil society movements have raised these issues with financial institutions funding such projects. Coming under the pressure of such movements major multi-lateral development organisations had included social and environment safeguards to their investments. These remain one of the tools of holding these institutions accountable.
 
National financial institutions specially the public sector banks are today primary lenders for such developmental projects in India. But PSBs do not have any mandatory guidelines to ensure that their investments do not cause harm to the common people of the country and destroy the environment. This coupled with lack of due diligence and reckless lending have also caused severe crisis within the Indian banking sector. Hence there is a need to develop robust safeguard policies.
 
Appointment of Employee Director / Officer Director 
 
The board of the banks is where decisions, inter alia, of the large scale loans are decided. Unfortunately, the posts of the employee director at the PSBs have been left vacant for far too long and thus preventing their voices at the Board has been a strategy of this government.
 
As a crucial stakeholder of the decisions of the banks, employees have to be a part of this decision making. We demand immediate appointment of employee director in all PSBs and policies to ensure that such appointments are not delayed in future.
 
Bank Merger
 
The government says its plan to merge one weak bank with two stronger banks will help to mitigate the burden of bad loans and further increase the lending capacity of the amalgamated entity. The merger may help clean up bad loans of the weak bank, but it would also necessitate more provisions by the new bank. Further, the new bank lending to the same large borrowers, without recovering existing bad loans will only result in more loss for the bank. Not just commercially unviable, but a three-way merger among banks with different administration will only result in an administrative chaos.
 
Mergers cannot resolve or clean up the balance sheets; rather the NPAs of the three merged entities would simply add up. The improvement in certain ratios, if any, would amount to mere financial engineering, without resolving the actual problem. Should learn from the mistakes of merging SBI with Associate Banks.
 
Privatisation
 
Public Sector Banks have been the driving factor of Indian economy since the nationalisation of banks in 1969. While private banks are confined to urban areas, with no branches or nearly no services in rural areas, PSBs serve one and all. Policy changes and political interference in the recent years have weakened and made them vulnerable, mounted the burden of non-performing assets and ended up charging for their services, hitting the poor the most. These are weakening the PSBs and steps like bank mergers are steps towards privatisation of PSBs and it should be vehemently opposed. Going forward, the PSBs must be strengthened, help them recover the bad loans from wilful defaulters and remove the bank charges introduced in the recent past and ensure its independence without political interference. We request you to give all assurance that “ Public Sector Banks will be strengthened and No Privatisation of PSBs”
 
GST
 
1. There should be greater relaxation for MSMEs for GST compliance, as the GST system invariably discriminates against MSMEs vis-a-vis large companies, as a large amount of working capital of MSMEs has to be devoted towards GST compliance.
2. There should be a lower tax rate for mass consumption goods, which should be compensated by levying a higher tax rate for luxury consumption goods.
3. The tax collection targets of the Government should come more through a progressive direct tax system, with higher tax rates for individuals in the high income category. GST or any such indirect tax is regressive as it puts more burden on people from economically weaker sections.
4. States should have a higher representation in GST council for determining the tax rates, on the lines of federal cooperation, which would also lead to offsetting the higher amount of control with the central government through a mechanism like GST.
 
Development Financial Institutions
 
Development Financial Institutions were established with the purpose of financing the mid and long-term large development projects and they have played a paramount role by contributing to the industrial growth and overall growth of the nation. During India’s economic liberalisation, these banks were slowly eliminated or transformed into commercial banks. With the dismantling of development banks, the scheduled commercial banks were forced to engage in long term lending, which parked the considerable part of banks’ capital and led to shortage of capital for other banking activities. Additionally, banks adopted aggressive lending practices and issued big loans without due diligence increasing the non-performing assets to an unprecedented level. The Standing Committee on Finance, in its report on the Banking Sector in India – Issues, Challenges and the Way Forward (May 2018) also made the recommendation to go back to the previous model of development banks for medium and long-term lending. The government should make sure that there are adequate development banks to provide long term lending for development projects so that commercial banks can focus on short term lending and other economic activities.
 
Parliamentary Oversight on IFIs
 
While their lending has been minimal, the influence of the International Financial Institutions (IFIs) on our economy and our policies have been disproportionate to the lending volume, facilitating and augmenting changing the fundamental structure of public sector, many of them privatised at throw-away prices. Yet, Parliament does not have a role when negotiations are underway with the IFIs. The highest law making institution of the country is handed down a decision made by the IFIs and bureaucrats, without a thorough deliberation on its impacts on people and the economy. We demand a Parliamentary oversight of all IFIs at all stages of negotiations, decision, monitoring and post evaluation of lending, to ensure that country’s interests are not compromised.
 
Ease of Doing Business Ranking
 
In a hurry to jump ahead in the Ease of Doing Business rankings, the government has reportedly taken 10,000 steps, most of it amending policies, as acknowledged by the Prime Minister. These policies are related to labour and environment standards, eliminating public hearing from the approval process for certain projects and diluting forest and land use policies. Considering the devastating impacts this could have on people and economy, we demand that the amendments are made to only strengthen the policies and wherever it has diluted or weakened it, it should be reversed.
 
Strengthen Co-operative Banks and Co-operatives
 
Co-operative Banks and Co-operatives like primary Agriculture Co-operatives are the ones catering to the poorer sections of the societies. They are neglected and there is an effort to privatise urban co-operative Banks. They have to be strengthened through NABARD and not allowed to dilute their goals.
 
Support RRBs and Stop Efforts to Merge them
 
Regional Rural Banks are doing a yeomen service in the rural areas. From 198 there number is reduced 56. There is another attempt to merge them state wise. This will defeat the purpose for which they were initiated. They have done well and they should be strengthened.
 
FRDI Bill          
                               
Because of people’s relentless campaign the Financial Regulation and Deposit Insurance (FRDI) Bill was withdrawn by the government, which otherwise would have risked depositors savings and would have jeopardised the existence of PSBs. However, the government is trying to bring in elements of FRDI Bill through different legislations.
 
We demand that such a move is reversed and resist the attempts of Financial Stability Board to meddle with our banking system.
 
Corporate tax wave off
 
Government should end the practice of waving off corporate tax year after year. The average corporate tax waiver the past few years have been more than Rs. 5 lakh crore per year – which is nearly one-fifth of the Union budget of past years.
 
Parliamentary Standing Committee Proceedings
 
Proceedings of Parliamentary Standing Committee on Finance should be made public and aired live to the citizens enabling them to watch and follow them, like in many other democratic countries. Such transparency would not only enhance accountability amongst and members and parties involved, but also ensure active and responsible citizenry.
 
Accountability of Regulators
 
The Regulatory Bodies should be accountable to the Parliament – submitting regular reports, which in turn is made available to the public. The Regulatory Bodies should engage with and consult investors, depositors, policy holders, pensioners or borrowers regularly to take feedback and in fine tuning the policies of regulation. The appointment and/or extension of tenure of the Chairpersons should be decided by a Parliamentary body, not just the Finance Minister and/or Finance Secretary as it is practiced now.
 
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Cheques valued over Rs20,000 crore not cleared due to strike
Clearance of cheques valued over Rs20,000 crore was affected by the bank strike that continued for the second day on Wednesday, said the All India Bank Employees' Association (AIBEA) -- a leading union in the banking sector.
 
The central trade unions in the country are striking work for two days -- January 8 and 9 -- protesting against the various policies of the Central government.
 
In a statement issued here, AIBEA said cheques worth about Rs 20,000 crore could not be cleared by the clearing houses all over the country.
 
"Even though officers in banks did not join the strike, they have extended fraternal support. Hence, though branches are kept open, normal banking services like cash transactions, clearance of cheques, remittances, bills discounting, government treasury operations, foreign exchange transactions, negotiation of import and export bills, were affected," the statement said.
 
According to AIBEA, the only major problem in the banks is the huge bad loans amounting to over Rs 13 lakh crore.
 
Owing to these bad loans and provisions for bad loans, 19 out of 21 public sector banks are in net loss though they earned an operating profit of Rs 155,585 crore as on March 31, 2018.
 
But amount provided for bad loans and others was Rs 240,956 crore. Hence, a net loss of Rs 85,371 crore for the 21 public sector banks, the statement said.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

 

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RBI extends tokenisation services to online merchants
Continuing its efforts to improve the safety of card transactions, the Reserve Bank of India (RBI) on Tuesday extended the use of tokenisation -- hiding of actual card details with a unique token -- in the wider payments ecosystem.
 
To date, the RBI had allowed card payment networks like Visa and MasterCard to use the tokenisation technology in card transactions. The technology is now allowed to be used by merchants holding the card credentials like online retailers.
 
"It has now been decided to permit authorised card payment networks to offer card tokenisation services to any token requestor (i.e., third party app provider)," the RBI said in a statement. For now, the facility will be offered through mobile phones and tablets only.
 
The permission extends to all use cases and channels like near field communication (NFC), magnetic secure transmission (MST)-based contactless transactions, in-app payments and QR (quick response) code-based payments, the bank said.
 
"The Reserve Bank has today (Tuesday) released guidelines on tokenisation for debit/ credit/ prepaid card transactions as a part of its continuous endeavour to enhance the safety and security of the payment systems in the country," the statement said.
 
Tokenisation involves a process in which a unique token masks sensitive card details and thus, in lieu of actual card details, this token is used to perform card transactions. The token will be unique for a combination of card, token requestor and "identified device". 
 
While all other instructions related to card transactions will be applicable for tokenised card transactions as well, the RBI stated: "The ultimate responsibility for the card tokenisation services rendered rests with the authorised card networks."
 
Before providing card tokenisation services, card payment networks will have to put in place a mechanism for periodic system (including security) audit at frequent intervals, at least once a year, of all entities involved in providing card tokenisation services to customers.
 
"Tokenisation and de-tokenisation shall be performed only by the authorised card network, and recovery of original Primary Account Number (PAN) should be feasible for the authorised card network only. Adequate safeguards shall be put in place to ensure that PAN cannot be found out from the token and vice versa, by anyone except the card network," the RBI said.
 
Registration of card on token requestor's app will be done only with explicit customer consent and the customers will have the option to register/ de-register their card for a particular use cases like contactless and QR code-based.
 
"Card issuers shall ensure easy access to customers for reporting loss of 'identified device' or any other such event which may expose tokens to unauthorised usage. Card network, along with card issuers and token requestors, shall put in place a system to immediately de-activate such tokens and associated keys," the bank added.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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