Why Privatisation without Checks and Balances will Ruin Public Sector Banks
The current crisis in the Indian banking sector has led to calls for privatisation of public sector banks (PSB). However, the private sector is no paragon of great virtue. Moreover, the faithful advocates of privatization are ill-informed of the real issues. The huge crowds that throng PSBs and put up with various inconveniences indicate the enormous faith that the public has in these banks. The challenge today does not involve providing ultra-sophisticated banking to the 10% upper crust. Instead, the true challenge is to provide basic financial services to India’s 90%, who may not be the source of great revenue to banks. Did you know that almost all government pensioners bank exclusively with public banks.
 
We should never forget the role PSBs have played in financial inclusion. These banks have been the backbone of socio-economic agenda for the government. In any particular rural area, the role of a PSB is not confined only to banking. It also encompasses a more holistic developmental agenda. PSBs are the one-stop shop for all financial needs of the local rural populace, including insurance, financial literacy, remittance and receipt of welfare subsidies and grants, amongst others.
 
The government’s socio-economic programmes have to use the banking conduit for movement of funds. Those who talk of privatisation should visit the remote branches of public banks, where managers live at great risk to personal lives, and are mentoring the local population, not just in financial literacy, but, also technical, business and agricultural literacy.
 
It was public banks that revolutionised rural India in the social banking era of the 1970s. The expansion of bank branches in rural areas was particularly noteworthy.
 
The figure rose from 8,261 in the year 1969 to a whopping 65,521 in the year 2000. The share of households accessing institutional credit rose from 32% to 61.2% between 1971 and 1981.
 
It was this emphasis on those excluded from the formal financial stream that led to a slew of measures in the field of finance, and drove so many bankers into the arena of the battle against poverty. It is tragic that even as the country is grappling with massive problems confronting its struggling masses, the ignoble billionaires now have regular rides to the public trough.
 
Politicians are equally guilty of undermining the integrity of banks. They stacked the decks with populist sops using banks as spigots for burnishing their election credentials. This was apart from the huge loans they have forced banks to shovel to their buddies. In India, the proportion of dodgy loans, involving the borrower not making interest payments or repaying any principal, has surged to the highest level among the world’s largest economies. The question is—why should ordinary people bear the burden of the fat cats? These free loaders are gleefully and remorselessly winnowing scarce bank capital. The government has to goose these banks with spruced up balanced sheets to make them lend again. Ironically, instead of being chastised, they are lauded as captains of the industry and adorn glorious positions in industry associations.
 
India’s pile of soured loans, whose value degrades like an unstable isotope, is a classic example of how powerful and politically influential tycoons undermine the rules to secure credit and then default on it. The huge losses posted by banks and the desperate attempts by government to detoxify balance sheets show how difficult it is for the rescue plans to deliver.  When borrowers become insolvent, their loans are added to an existing mountain of debt. Each time it happens, banks have to make heavy write-downs, ploughing the dud loans like rotten potatoes, ultimately choking the credit line. To keep these banks going, the government has to regularly keep injecting capital into them.
 
Most big defaulters have the money to employ legal experts who can play the judicial system—it is here where the law flounders. India has some of the most draconian laws in books, which are ineffective against powerful dodgers. We keep producing new laws when the existing ones are adequate and just need more teeth to obtain results. We show such promptness in condemning waivers for poor farmers, but, we lack the courage to tame the big fishes because they have enormous clout.
 
Banks are known to become aggressive in turning mortgage defaulters to the streets. Scores of indebted farmers are tying the noose out of sheer humiliation. Then there is a class of salaried people who rarely default, but, are chased down for their small unpaid debts. The bankers seem to be totally helpless when it comes to malfeasant promoters of big businesses. Scammers and swindlers have outfoxed the system. The bank’s safeguard systems are buttressed by state institutions, such as regulators, bankruptcy procedures and courts. But what finally underpins the security of the whole ecosystem is trust. The Reserve Bank of India (RBI) now no longer appears to be the financial seer that was lionised for insulating the domestic economy from the financial turmoil of 2008. 
 
Scams are a product of greed and immorality. However, abuse of the financial system has been made possible because of the system’s weaknesses. In an age, which heralds technology as the silver bullet, we should not overlook the most important source of competitive advantage—the people. Compliance and controls are dependent on people running it. A process is only as good as the people managing it. The most agile auditors will also have to struggle to stop managers, who are determined to hide their dirty laundry from view.
 
The reason for protecting the borrower against the creditor is that the much-reviled moneylender looms large in our collective psyche. The scenario now is totally different. Big borrowers are not like helpless farmers and the lender today is not the cruel sahukar but, the public bank. When these large businessmen default, they rob each one of us taxpayers. In several cases, precious and scarce bank funds are being used to finance the opulent lifestyles of the rich.
 
The turmoil has prompted calls for improvising risk management models, which seem to have created an illusory sense of security. However, models and machines cannot act as a surrogate for human expertise. Money management is no more a genteel world. Bankers will now have to bring in hard-boiled traders’ instincts to make it safe and secure. In a prophetic warning, way back in 1913, John Maynard Keynes wrote in Indian Currency and Finance: “In a country so dangerous for banking as India, (it) should be conducted on the safest possible principles”. Our departure from the time-honoured metrics has come at a heavy cost.
 
The Indian financial sector is at crossroads now, and its leaders will now have to use their financial alchemy to overcome its most challenging moment. Perhaps, it is one of those occasions where Rudyard Kipling’s advice can be the best guide: “If you can trust yourself when all men doubt you, but make allowance for their doubting too.”
 
It will not be out of place to quote the former RBI governor Raghuram Rajan, from his Homer Jones Memorial Lecture, delivered at the Federal Reserve Bank of St. Louis, St. Louis, Missouri on April 15, 2009. “A crisis offers us a rare window of opportunity to implement reforms-it is a terrible thing to waste. The temptation will be to overregulate, as we have done in the past. This creates its own perverse dynamic… Perhaps rather than swinging maniacally between too much and too little regulation, it would be better to think of cycle-proof regulation. ”
 
(Moin Qazi holds PhDs in Economics and English. He has been associated with the development sector for almost four decades. He can be reached at [email protected])
 
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    COMMENTS

    Pradeep Kumar M Sreedharan

    1 year ago

    Buggering the banks isn't an accidental result, it's the original intention.
    Intention is privatisation,none else. How else can you clamour for privatisation?
    Simple, isn't it?
    How else can you pick up PSB and their Prime Quality real estate for peanuts.?
    What is more beautiful than looting the PSB and scooting and route the same money to buy out the PSB. Ha ha ha ha!
    Elementary dear Watson, elementary ha ha!

    Abhijit Gosavi

    1 year ago

    I agree with this article 100%. Private banks *anywhere* are full of crooks. If all the banks are privatized, the Indian govt will be looking at a dangerous situation where it will have to bail out pvt banks from time to time for pvt banks will crash regularly. Keeping track of the activities of pvt banks is never easy *anywhere.* In 2007-2008, when banks in the West collapsed, FDIC did not have the money to bail them out; it is for that reason the govt had to intervene. So a hybrid model where govt allows the poor and senior citizens to have accounts in govt banks for small amounts (up to 50 lakhs say) and provide a govt.-backed insurance for larger deposits (up to 1 crore) in pvt banks seems like the only viable solution.

    Gupta

    1 year ago

    I like the words "will Ruin Public sector banks".... hahaha.. what a joke! Is there anything left to be ruined? Its like saying "kichad ganda ho jayega!".... all these arguments have been made umpteen times to hide the core issue (which is intentionally never mentioned by these smart journalists). The core issue is corruption... loans are given by managers against money. It is silly to assume that these bank employees didn't know that the loan won't be repaid. It was known on day one. The problem is as simple as that - corruption. Yes, it exists in the private sector banks too, but just in 2 banks out of 5-10 private banks. All others are healthy and individually worth more than all public banks put together. But with public sector banks... each and every bank is neck deep or rather beyond head deep in corruption. 100% of them. That is why they should be privatized (if there will be any buyer..... like Air India, no one will want to buy a box of shit, but that's another story).

    As for the oft repeated argument of social objectives, under whose garb this argument of keeping PSBs alive has been ranted for 50 years now.... there are many ways of achieving those goals through private banks... just be commercial and pay them the subsidy that it deserves to provide those services... rather than the typical Indian way of cross subsidizing everything (using banks profitable areas to fund the loss making ones).

    The reason HDFC Bank is worth 550000 crores is because it earns a 4%+ interest spread and that spread is so high because of the high credit losses in the Indian banking system. Interest rates are a function of cost of borrowing + admin costs + credit costs + profits. In India, credit costs over a long term are 2-2.5%, almost 10x higher than most other countries. That's the juice that HDFC earns by keeping its average losses in the 0.5-0.75% range, a clear advantage of 1.5% extra profit v/s its corrupt peers. There is no more rocket science in why it is so much more successful than all others.

    REPLY

    Abhijit Gosavi

    In Reply to Gupta 1 year ago

    Absolutely. But if all banks are privatized and the insurance stays at 1 lakh (or a few lakhs), where it is currently, millions will lose money when these banks will collapse; and they will sooner or later! All pvt banks collapse from time to time, unless there are strong controls on them, and I don't see those kinds of controls working in India. Needless to add, PSBs need to get out of the business of giving huge loans; there I agree with you.

    Gupta

    In Reply to Abhijit Gosavi 1 year ago

    Other than co-operative banks, which are politicians banks, not private banks, Please give just one example of a private bank that failed where people lost even a rupee. Think before you say "all private banks fail from time to time". Ridiculously out of sync with reality. Govt just infused 1.35 lac crore of equity in public sector banks. That is taxpayers money which we are losing. Govt has not put even a penny in private banks. Alas, in this country, people are born blind and brain dead.

    Abhijit Gosavi

    In Reply to Gupta 1 year ago

    Oh, I meant worldwide; not just India. If you look at the history of pvt banks anywhere, they fail from time to time. Most major pvt banks in the West failed in 1929 and then again in 2007-2008. The Glass-Steagall Act enacted in 1933 was dissolved in 1999-2000, and sure enough banks failed in 2007. Pvt banks are full of crooks anywhere. The reason India's large pvt banks have not failed is that they know the govt will NOT bail them out. But they also know that once PSBs disappear, the govt will be forced to bail out them out should they fail (everyone will have their accounts there & the economy will crash). Commonsense. The author of this article is absolutely right in pointing out the dangers of 100% privatization. Like I said before, and there I agree w/ u, PSBs should get out of the business of making huge loans, where, as you rightly pointed out, there is enormous corruption (with politicians involved). The rock-star ex-governor cited here was fully aware of that and, as is well-known now, did nothing.

    Gupta

    In Reply to Abhijit Gosavi 1 year ago

    It's an utterly whimsical idea to believe that banks will work towards failing themselves. Let me assure you no one works to die. Your comments are full of assumptions. By the way, since 1991, one private bank did fail - Global Trust Bank. And govt merged it with OBC leading to 100% for shareholders and zero loss to deposit holders. That's how it should be, though a good regulator would ensure that also doesn't happen and problems are nipped in the bud. That won't happen in India because the regulator is also "public sector"and hence breeds inefficiency. Anyway... I rest my case.... cannot keep arguing against whimsical assumption based comments. All I would say is taxpayers have repeatedly lost money on public sector, whether it is Banking or airline or telecom or fertilizer or hotel. With private sector, that does NOT happen. People are pushed towards efficiency by default in private space. Not giving big loans is not a solution to corruption. There is as much corruption in SME loans as in large ones - they just don't make news.

    Ramesh Poapt

    1 year ago

    ab hosh mein ane pe hai behoshiyon ka gam, jaye to kidhar jaye..
    is raste mandir hai to us raste dharam..( lata.m..chhotisi mulakat)

    Gopalakrishnan T V

    1 year ago

    Some element of competition is a must to make both PSBs and Private sector banks perform No doubt checks and balances are needed on both to ensure that both these groups of banks stick to professionalism in running the banks and make them accountable to public through their healthy and unfudged balance sheets. For this to happen, these banks should be brought under a professional Regulator free from Government interference of any kind. There should never be any bureaucrats in the Regulators Board and banks' boards. Even the Regulator should be made accountable to the Parliament for all the lapses seen in Banks functioning . Parliament should consist of men of eminence and not crinminals who are known looters and for suspicious behaviour . What we need is men of integrity to head and run institutions to take the nation forward and accountable to public. One should be proud of our Judicial system, Governance Standards , adherence to values and prospirity among the masses. Recognising merits in the appointment of men of professional integrity at the helm of affairs of sensitive Institutiutions is the backbone of any Country's progress and as long as nepotism, favouritism and all imaginable corrupt practices are practised ignoring the widely preached values and Dharma in appointing men of doubtful integrity, no other known checks and balances will not and cannnot be of any use. Volumes get written ,intellectuals raed and relish and there ends everything.

    K V RAO

    1 year ago

    An excellent write up.
    It is quite surprising why the celebrated monetary economist J M KEYNES as early as 1913 branded India as a dangerous country for banking . Will the writer or anybody throw light on this point?

    Despite the ominous warning, Indira Gandhi, for her self ambitious goals, nationalised (twice)banks. The outcome, since 1969 and 1980,is staring at all Indians.

    India has proved to be a true political economy.

    SuchindranathAiyerS

    1 year ago

    Anything the Indian State touches with it's corrupt, incompetent, prejudiced (reservations, selective accountability, Neta-Babu greed etc) hands is doomed. Public Sector Banking is just one example. That it lasted so long is the result of cover-up operations and deficit finance. Privatization is the only way forward provided the Sarkar makes good the wealth that it has siphoned from the Banks by omission or commission. But who will the Sarkar return the banks to? Apart from the wealth, the Sarkar has destroyed the individuals, the culture and the traditions that built each Bank. Analogous to the Temples where the Sarkar has marginalized and exterminated the hereditary education and law giving trustees, the Brahmanas to carry out the British design commenced in 1923 so as to loot and pillage for the benefit of the neo aristocracy that the British surrogacy of PANGOLIN*s created.

    *Note: PANGOLIN: An enemy of India who believes in inequality under law, exceptions to the rule of law and persecution of some for the benefit of others. At present, the sole purpose of the Indian Republic, Constitutional or otherwise, is to pamper and provide for certain constitutionally preferred sections of society who the British found useful to hold and exploit India at the cost of those who the British hated and persecuted. The Pangolin is a creature that is unique to India and feeds on ants that are known in nature to be industrious and hard working if not quite as fruitful as bees who flee to better climes. (PANGOLIN is an acronym for the Periyar-Ambedkar-Nehru-Gandhi-Other (alien) Religions-Communist Consensus that usurped the British Mantle and has worn it with elan to loot, plunder, and rape India since 1921 and re write History and laws to their exclusive benefit since 1947)

    REPLY

    K V RAO

    In Reply to SuchindranathAiyerS 1 year ago

    Congrats to Aiyer for his enviable and inimitable style. There could not have been a better explanation of pitiable situation where all Indians have been placed. If possible pl let me know his mobile no.as I know him personally.K V RAO

    Banks harass no-frills account holders by freezing or converting their account to regular ones: IIT Study
    While the Reserve Bank of India (RBI) has launched a SMS and advertisement campaign to promote no-frills accounts, it seems completely unaware of the harassment meted out to these customers by banks — either in the form of conversion to standard accounts or freezing their accounts after four transactions. 
     
    An academic study by Prof Dr Ashish Das, from Department of Mathematics at Indian Institute of Technology Bombay (IITB), has found that banks are quietly converting a no-fee basic savings bank deposit account (BSBDA) to a fee-based regular account with high minimum balance requirements or charging a fee, the moment such customer carries out fifth digital payment transaction in a month. In such scenario, the account remains converted as regular saving account making the customer liable to pay for several services besides keeping minimum balance amount in her account all the time. 
     
    According to the study, while India is working hard to bring about ease in digital transactions, State Bank of India (SBI) has debarred its 13 crore BSBDAs to carryout debit transacts more than four times in a month, even if it constitutes only digital transactions. Given that volumes of such accounts have been opened (under PMJDY) with an intention of financially including the excluded, such a scenario lacks the desired spirit of digital financial inclusion.
     
    In addition, some banks adopted an ingenious, but faulty ways to overcome pains of BSBDA regulations. "HDFC Bank and Citibank, with a complete lack of spirit towards their BSBDA customers, have in a discretionary fashion thrust a responsibility onto the BSBDA holders of keeping track of how many debit transactions they are doing. These banks without explicit and voluntary consent of customers are unilaterally converting the BSBDA into a regular savings account, requiring high minimum balance, the moment a fifth debit transaction is done by the customer in a month.  Thereafter these banks would start imposing fees as high as Rs600 every month for non-maintenance of minimum balance that the customer was not made aware of at the time of entering into a relationship with the bank. The customers have not been given an explicit option to bestow the responsibility onto the bank of not allowing the fifth debit transaction in a month if the bank cannot provide it for free. By carrying out a fifth debit transaction in a month and create a potential to earn a service charge of as high as Rs600 per month from such customers. Thus, a recurring charge gets built-in in the name of high minimum balance requirement of the converted account," the report says.
     
    The Report also reveals dubious practices adopted by banks to take implicit consent instead of explicit consent from the basic saving bank deposit account holder. It says, "Under advice from RBI, banks have suddenly changed the rules of the game; with HDFC Bank and Axis Bank changing the rules as late as end-April 2018.6 Moreover, to their advantage and comfort, banks consider it sufficient to take only an implicit consent of converting a BSBDA to a regular account rather than explicit consent from BSBDA holders – the implicit consent is in the form of sending SMS, which may convey that the account has been used for a fifth debit in the month and that any further debit in the month would automatically convert the BSBDA to a regular account. Such an approach adopted by the banks is devoid of an explicit consent of the BSBDA holder to allow conversion."
     
    All banks have their regular savings bank account product with certain minimum balance requirements failing which a fee is imposed. To overcome this requirement of minimum balance and in the interest of financial inclusion, RBI mandated that all banks offer BSBDA. However, during the past four years many banks faulted by imposing service charges to BSBDAs, in violation to the RBI‘s extant rules and regulations, Prof Das says in his the Report. 
     
    Prof Das says, "The disclosures of incorrect service charges for BSBDA on the banks' websites and imposition of the same to the customers persisted despite the regulator being aware of it. Apparently, the bank supervisor has faulted in clear understanding of the complex regulation and therefore in carrying out effective supervision. Issues of consumer education and consumer protection were also found wanting."
     
    "By not ironing out the design issues, RBI has created irrational impediments in the financial inclusion drive of the country - whether in form of inhibiting digital payments or through promoting cash usage by disallowing banks to charge beyond a certain monthly quantum (in value terms) of cash deposits. RBI's tenacity to avoid addressing the same, or lack of zeal to examine and provide explanations, is detrimental to the interest of about 280 million active BSBDA customers and of the banks," he added.
     
    He says, "Though these violations were detrimental to the vast number of BSBDA holders in direct monetary terms, neither did RBI supervise properly in stopping imposition of such charges by the banks, nor did other bodies, like the Banking Codes and Standards Board of India (BCSBI), independently worked towards protecting the depositors. To specifically mention, the Consumer Education and Protection Department (CEPD) of RBI, which has been vested with the responsibility to overlook on issues related to consumer education and protection, failed to be effective on this aspect though they had been aware of the same for quite some time now. Technically, Department of Banking Regulation (DBR) of RBI should have taken the lead to address the systemic issues, but they failed in coming out clean and clear."
     
    However, Prof Das feels the regulation on BSBDA needs to be looked more holistically, upholding the law and ensuring that it does not encourage non-compliance over those banks that choose to be compliant, though at a cost to them. "For example, ICICI Bank on realising the correct definition of BSBDA reversed all charges retrospectively that were imposed on such accounts. Also, few banks, from the very beginning, imposed no fees on additional services that they provided under BSBDA," he added.
     
    In August 2012, the Reserve Bank introduced BSBDA and advised banks to offer this account alongside other variants of savings bank accounts. BSBDAs were mandated by RBI to be considered as a normal banking service available to all. 
     
    After several queries from banks and account holders, the Reserve Bank in September 2013, clarified and to a great extent redefined, features of BSBDA through a list of frequently asked questions (FAQs). The minimum common facility in a BSBDA that is to be provided by banks to all their customers, without the requirement of any minimum balance and charges, was modified. Banks were required to provide a minimum of four free debit transactions per month. Also, for a BSBDA, the banks were encouraged to provide additional services so long as they are provided free.
     
    If the bank allows the BSBDA holder to carry out more than four debit transactions per month as per its discretion, all those additional debit transactions necessarily have to be provided free of charge. The regulation says that any withdrawals from a BSBDA, after the mandated first four free withdrawals, cannot be considered a withdrawal from a BSBDA unless all such withdrawals that the bank allows are also provided free.
     
    In other words, Prof Das says, this would mean that banks have to necessarily allow a threshold floor of four free debits in a month. Thereafter, if a bank does not want to allow for free-debits beyond four (or five or any number that the bank decides) through any specific mode of debit transaction, the bank has to disallow the debit transaction once such a threshold is reached. Under such a restricted scenario, if a customer so desires or her banking needs so warrant, she can always come forward and consciously decide to change her BSBDA to a regular savings account, which would attract, inter alia, fees for non-maintenance of a certain minimum balance in the account, he added.
     
    State Bank of India- SBI, the country's largest lender had already implemented the same in June 2017, while Axis Bank has started it recently. The two banks have disallowed BSBDA holders' money to be made available on demand beyond four debits a month. Demand deposits contain the money consumers need for paying daily expenses. Debit-freezing the account for the month after four debits in the month amounts to asking such depositors to live a whole month with only four digital means of payment for making everyday purchases and bill payments using point of sales (POS), and BHIM.
     
    Although RBI is credited for designing BSBDA, the Report says, even after passage of five years, BSBDAs did not get implemented in proper spirit. It says, "One of the reasons for this is the lack of a reasonable business model for banks serving such accounts where actual balances maintained could be low. The Government launched Pradhan Mantri Jan Dhan Yojana (PMJDY) on 28 August 2014, for extending formal financial services to the financially excluded population.
     
    Notwithstanding the push by government's promotion of PMJDY since September 2014, which is essentially opening of BSBDAs, the other major reason for improper implementation of BSBDA has been the incapacity of the banks and the public to appreciate the true features of BSBDA. As a consequence, till date not only are many banks non-compliant in providing the appropriate services associated with a BSBDA, but the public at large have also been mis-educated by the banks."
     
    BSBDA & PMJDY
     
    As on date, about 54 crore BSBDAs have been opened through branches and Business Correspondent (BC) points, of which, more than half have been opened under PMJDY. It is noted that since the inception of the PMJDY, the thrust has been to open only BSBDAs under the Yojana, the report authored by Prof Das says.
     
     
    PMJDY accounts are meant primarily for financial inclusion with a greater view to check the menace of banking untouchability for those who do not have the same resources and opportunities available to others. BSBDAs, on the other hand have a much broader perspective and can be opened by anyone - not only by certain types of individuals like poor and weaker sections of the population but also other sections of the population without any restrictions imposed on income. It is a basic banking account available to all customers.
     
     
    Basic savings bank deposit account -BSBDA got the required push only after launch of PMJDY. In FY2013-14, the number of BSBDA holders were 24.3 crore, which jumped to 39.2 crore, mainly due to about 14.7 crore accounts opened under PMJDY. As on FY2016-17, there were 53.3 crore accounts under BSBDA and PMJDY together. PMJDY contributed 28.2 crore accounts with BSBDA remaining at 25.1 crore accounts during the year. Though public is less familiar with the nomenclature of BSBDAs, as of March 2017, of the 150.2 crore savings bank accounts opened, 53.3 crore were BSBDAs. This also means every third savings bank account (active or inactive) is basic savings bank deposit account- BSBDA.
     
     
    Last year in June, Prof Das published similar report highlighting the need for Reserve Bank to concrete issues surrounding the provisioning of such accounts. "Of the 54 crore BSBDAs opened about 52% are active. Thus, these issues are not only hurting the vast population of about 28 crore active BSBDA holders but also the banks, who are having difficulty to meaningfully comply with RBI‘s equivocal but strong wordings in the regulation," the report had said.
     
    The June 2017 Technical Report recommended RBI to plug the current rampant non-compliance of regulation related to opening of BSBDA, to reconsider its policy and modify its regulation, so as to allow retaining the account status as BSBDA while imposing reasonable charges beyond the mandated thresholds on cash transactions and certain value added services. The Report also asked RBI to direct banks to allow unlimited free electronic debits for purchase of goods and services through debit cards, and internet or mobile based digital payments at merchant establishments.
     
    Besides the last year's report also recommended use of Depositor Education and Awareness Fund (DEAF) for running campaigns to educate public on the correct features of a BSBDA. 
     
    The Reserve Bank started airing new advertisement on BSBDA during the recently concluded Indian Premier League 2018 cricket matches. It also published advertisement in newspapers.
     
    Prof Das says he visited one bank branch to enquire about opening a BSBD account for himself. “In first bank, the employee plainly refused to open the account. So in next bank, I told them about the advertisement in newspaper on BSBDA. The employee there told me since this advertisement is from RBI, I should go and open this account in Reserve Bank!” 
     
    Prof Das from IIT-Bombay feels the BSBDA product cannot or rather should not fluctuate between being a BSBDA and being converted to a non-BSBDA by imposition of a fee at the drop of hat and that too at bank's sole discretion, else we would not know how many BSBDAs are there in the country today. 
     
    Here are some interesting questions, he asks...
     
    • Do the banks offer opening of a BSBDA as per the mandated definition and fee structure?
    • Do the banks offer an exclusive BSBDA which would not impose any fee as per the mandated product design?
    • Are the declared service charges for a BSBDA or the mechanism adopted to impose
    • charges, as announced at the banks' website/branches, correct?
     
    Prof Das says, "RBI‘s tenacity to avoid addressing the same, or lack of zeal to examine and provide explanations in this regard, is detrimental to the depositors and the banks even under Section 35A of the Banking Regulation Act, 1949."
     
    Section 35A in BANKING REGULATION ACT, 1949
     
    [35A Power of the Reserve Bank to give directions. —
    (1) Where the Reserve Bank is satisfied that—
    (a) in the [public interest]; or
    [(aa) in the interest of banking policy; or]
    (b) to prevent the affairs of any banking company being conducted in a manner detrimental to the interests of the depositors or in a manner prejudicial to the interests of the banking company; or
    (c) to secure the proper management of any banking company generally, it is necessary to issue directions to banking companies generally or to any banking company in particular, it may, from time to time, issue such directions as it deems fit, and the banking companies or the banking company, as the case may be, shall be bound to comply with such directions.
    (2) The Reserve Bank may, on representation made to it or on its own motion, modify or cancel any direction issued under sub-section (1), and in so modifying or cancelling any direction may impose such conditions as it thinks fit, subject to which the modification or cancellation shall have effect.]
     
    "In view of the vast number of active BSBDA holders, which is about 28 crore in number, and given that these account holders are usually the poor and gullible lot, RBI needs to take a conscious view in providing clear guidelines so as to allow the product to evolve in the hands of the banks, while simultaneously protecting the interest of the country‘s digital payments drive," Prof Das concludes.
     
     
       
     
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    chinmaya mund

    1 year ago

    I suffered from something like this. I had a zero balance 3 in 1account with ICICI. After a year, this march they turned my account to a privileged account and they sent me an SMS saying I requested it which I didn't. Then after a month, I get an email saying your MAB is 1,50000 and there are charges to not maintaining MAB. I wrote to customer care to change it back to the previous status, but they said I will need to go to the branch and sign some account degrading form. I went there and signed twice, but they failed to convert it and they deducted 1500 from my account this may. Sadly I wrote to them again and now I am closing my account with them. I got cheated. dangerous bank.
    Thought I should write my story after reading this article.

    Ramesh Poapt

    1 year ago

    excellent!

    10 lakh bank officers and employees to go on strike on 30-31st May
    About 10 lakh officers and employees from government and private banks will go on a 48-hour strike starting on 30 May 2018, following failure of talks between the bank unions and government.
     
    The strike proposed by United Forum of Bank Unions (UFBU), an umbrella body of nine union in the banking sector representing staff and officers would beginning at 6am on 30th May and will go on till 6am on 1 June 2018, demanding early revision of wages. The wage revision has been due since 1 November 2017. Previous talks on wage revision between UFBU and IBA held in Mumbai on 5 May 2018 had failed.
     
    During the meeting on Monday, UFBU leaders conveyed their grievance that there is inordinate delay, an offer of 2% was not in good taste and the practice of wage negotiation for officers up to Scale VII, which has been the practice has to continue. The Chief Labour Commissioner (CLC) supported the issues and asked IBA to respond positively. The IBA representative said that they will consider revised offer but requested the UFBU to quantify the demand.
     
    "UFBU stated that our Charter of Demands is clear. On Officers wage revision, IBA said six banks have given restricted mandate. IBA also talked about losses of the Banks. Quoting figures, UFBU leaders, however proved how operating profit of banks have doubled, staff expenses have reduced, and business have more than doubled. The CLC opined that bank officers and employees have to be paid for hard work and not based on profit. IBA, however, was not ready to come out with a new offer but assured to continue the negotiations. On officers’ scale, IBA was willing to discuss with banks but could not give any assurance.  As there was no concrete proposal, UFBU which met immediately after announced that the strike will continue," says DT Franco, General Secretary of All India Bank Officers' Confederation (AIBOC) in a statement.
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    sameer saxena

    1 year ago

    आज हम सभी से पहले तो आज की घटना का विस्तृत वर्णन करना चाहेंगे। आज सुबह 10 बजे वी बैंकर्स की टीम सारांश भाई की अगुवाई में श्रम मंत्रालय पहुची वहां जाकर उन्होंने बैंकर्स के विभिन्न मुद्दों पर अपना पक्ष रखा जिसे मुख्य श्रम आयुक्त ने स्वीकार किया और इस बारे में संबंदित कार्यवाही का आश्वासन दिया।
    इसके बाद वी बैंकर्स टीम iba और ufbu यूनियंस के मध्य जहा वार्ता चल रही थी वहां पहुची और सभी से बातचीत की जिनमे मुख्य वार्ता सी. वेंकटचलम जी से की । वी बैंकर्स का वार्ता का मुख्य उद्देश्य आज ufbu द्वारा प्रस्तावित 2 दिन की हड़ताल 30 व 31 को दो दिन से बढ़ाकर अनिश्चितकालीन बनाना था।
    पर जैसा कि आप सभी जानते ही हो हमारे नेताजी ने आज तक हमेशा से ही बैंकर्स को उल्लू बनाया है जिनके समझौते के लिए आज तक इन नेताओं ने कुछ नही किया। और इन रिटायर्ड नेताओ को आखिर किसने अधिकार दिया हैं हम सभी बैंकर्स के लिए फैसला लेने का।
    अब इन सब वार्ताओं के बाद वी बैंकर्स ने फैसला लिया कि जब ये नेताजी हमारे बारे में सोचते ही नही तो फिर बैंकर्स को भी इन्हें bycott कर देना चाहिए। साथियो ये हमारी जंग जब तक सीपीसी नही मिलेगा तब तक जारी रहेगी । और अब इस 2 दिन की iba और यूनियन्स की मिलीभगत से की गई इस हड़ताल का हम पुरजोर तरीके से विरोध करते हुए आप सभी से आह्वान करते हैं कि कल सभी बैंको की सभी शाखाएँ खोले और सभी बैंक जाए ताकि इनको अपने गलत कदम का अहसास होे।कि इन्हें जिस काम के लिए पद दिया गया है उसकी गरिमा भविष्य में ये सब समझें। बहुत से साथियों के अभी अभी strike में नही जाने के लेटर मिले ,जिन्होंने धारा के विपरीत चलने का साहस उठाया है । आप भी उठाए और गलत कदम के खिलाफ आवाज उठाइये
    बैंकर्स uniity जिंदाबाद

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