I fully agree with suggestions given by House that there
should be uniformity in deposit scheme of all financial institutes, chit funds
and banks to avoid unhealthy competition among banks and various chit fund. It
is ultimately the poor investor and depositors who are subjected to loss due to
unwarranted interest war.
I therefore also suggest for uniform interest rate
regime under the guidance of Reserve Bank of India. Due to interest war only
banks in general are facing asset liability mismatch and many smaller public
sector banks have to suffer loss only due to large banks of the same Indian
government offering higher rate of interest on deposits and offering lower rate
of interest on loans.
Poor common men are trapped in chit fund scheme which
offer higher rate of interest but fail to keep the commitment and finally cause
loss of capital money kept by common men at chit fund branches.
If interest rate and deposit schemes are finalized by RBI
keeping in view priorities of the nation and keeping in view the lending rate
which can induce growth in credit, equitable growth in all sectors and finally help in growth of GDP, I expect banks in general will focus on their service quality to attract new business instead of sacrificing interest of common men who keep their hard earned money in state run banks for safety and reasonable growth
Interest
war keep banks engaged in managing asset liability mismatch and when rate of
interest charged by a bank is slightly higher than other sister banks, customers
transfer their account to other bank which offer to charge lower rate on their loan. This culture of competition among various sisters of the same guardian (among government banks ) unnecessarily
give rise to shifting of business from one bank to other and unhealthy discounts to
borrowers at the cost of bank's own profitability.
It is not out of place to mention here that a few of top ranked corrupt bankers do not even hesitate to sacrifice even crores of rupees in allowing interest concession or in loan waiver or in compromise settlement to earn a few lac in bribe or for getting small gifts and favour from business houses.
In this way one can conclude that both banks and customers are suffering loss by way of avoidable interest rate war among various banks , chit funds and FIs . Lastly it is only common men and investors who have to suffer if a chit fund or a bank collapses due to mismanagement of its financial castle built on sand land.
As such it is always desirable to have more and more transparency in the system and less and less discretionary powers to individuals for indiscriminate concession in interest rate on lending and offer of higher rate on deposits they mobilize in the name of growth of business.If deposit schemes are made uniform , lending rates will also be uniform and then banks will have on option to extend best customer service to enhance their business prospects.
It is not out of place to mention here that a few of top ranked corrupt bankers do not even hesitate to sacrifice even crores of rupees in allowing interest concession or in loan waiver or in compromise settlement to earn a few lac in bribe or for getting small gifts and favour from business houses.
In this way one can conclude that both banks and customers are suffering loss by way of avoidable interest rate war among various banks , chit funds and FIs . Lastly it is only common men and investors who have to suffer if a chit fund or a bank collapses due to mismanagement of its financial castle built on sand land.
As such it is always desirable to have more and more transparency in the system and less and less discretionary powers to individuals for indiscriminate concession in interest rate on lending and offer of higher rate on deposits they mobilize in the name of growth of business.If deposit schemes are made uniform , lending rates will also be uniform and then banks will have on option to extend best customer service to enhance their business prospects.
House panel wants ban on ‘unrealistic’ deposit schemes--Business Line
NEW DELHI, MAY 17:
In the light of the Saradha group scam, Parliament’s Standing Committee on Finance has called for a complete ban on all deposit schemes which promise abnormal returns.
Some committee members were of the view that the Finance Ministry should issue an executive order to bring all the deposit schemes under the regulation of the Reserve Bank of India, as recommended by the Financial Sector Legislative Reforms Commission.
The committee will discuss the matter at length with the RBI on May 24, and with markets regulator Securities and Exchange Board of India (SEBI), which regulates collective investment schemes, on May 31.
The committee, chaired by BJP leader and former Finance Minister Yashwant Sinha, met on Friday to discuss the chit fund scam. Sources said that it was of the view that there should be a ‘single law and a single regulator’ to deal with investment schemes.
The meeting was called in the backdrop of the collapse of the Saradha Group, which had duped lakhs of investors of their hard-earned savings totalling thousands of crores of rupees. The Parliamentary panel has asked the Finance Ministry to submit a written reply on the operation of such investment schemes in the country and preventive actions taken by them.
According to sources, Gurudas Dasgupta of CPI termed the entire matter as a complete failure of the system. He lamented that the Finance Ministry’s different wings, including revenue intelligence, enforcement directorate and the income-tax department, could not spot something fishy in the schemes which were offered openly in newspaper ads.
Dasgupta is believed to have said that the Finance Ministry and even the State Government could not find out that paying over 30 per cent returns on investment were untenable.
The Committee examined the issue in the presence of top officials of the finance and corporate affairs ministries, as well as representatives of SEBI, RBI, Enforcement Directorate and the Central Board of Direct Taxes (CBDT).
http://www.thehindubusinessline.com/industry-and-economy/banking/house-panel-wants-ban-on-unrealistic-deposit-schemes/article4724456.ece#comments
Saturday, April 28, 2012
Why not Uniform Interest Rate
The war continues among banks on interest rate. After nationalization of banks in 1969, RBI used to decide rate structure for deposits and for lending uniformly applicable for all banks. But after adoption of reformation policy in the year 1991, RBI freed lending rates excepting loans upto Rs.2.00 lacs. In the name of competition, banks started rate war to attract high profile customers into their fold. Social banking concept and mass banking approach initiated through nationalization of banks have now become the history.
Common men are now neglected for all practical purposes. High profile customers have now become the heroes and bankers now run behind these heroes. Profit making has become the sole priority. Priority and neglected sector of the society has became the last option for government banks as well as private banks so far as the growth in business is concerned.. Lending for farmers has slowly been transferred to NGOs and Micro Finance Institute who have gradually started lending at higher rates, even higher than local money lenders. It is also true that in the name of poor, banks open Financial Inclusion branches and only open No Frill accounts to give direct credit of various aids and subsidies to real beneficiaries. I am unable to understand how poor people will get satisfaction and fight with their poverty merely by having a bank account until their real regular income rises.
Please click on following link to read more this subject
Cooperative societies more bankable for poor: RBI study
MUMBAI, MAY 17:
Cooperative societies are seen by the poor as more approachable than banks, according to the findings of a Reserve Bank of India research study in Kerala.
The study of the portfolios of the poor, based on data provided by 107 poor households in Ernakulam district, said commercial banks seem to suffer from a perception problem.
“It appears that the banks are not yet considered as a friendly neighbourhood institution on which one can rely for their financial requirements.
“There is a clear need for removing this perception, highlighting simultaneously the lower cost of their credit and other advantages,” said the study ‘How the Poor Manage their Finances: A Study of the Portfolio Choices of Poor Households’.
CREDIT GAPS
A majority of the households have savings bank accounts with commercial banks. But any meaningful financial inclusion of the poor by the commercial banks depends on their ability to meet the credit gaps of the poor households.
“The track record of the commercial banks in reaching timely credit leaves much to be desired. They are not reported as the much sought after option of the poor in times of need,” said the study.
The study observed that the dependence of the poor on moneylenders for gold loans despite the lower interest rates on bank loans indicates that more than the interest rates, it is the easy and timely availability which matters to the poor.
Here, the co-operative societies and the moneylenders score over commercial banks.
TAILOR-MADE SCHEMES
The study finds that the poor need credit for meeting the frequent gaps in income inflows and consumption outflows.
This highlights the need for small consumption loans, including festival loans, by way of a line of credit or an overdraft.
Besides, the banks’ credit schemes will have to be tailor-made to meet the specific requirements of the poor which are of diverse nature.
The study shows that the co-operative societies have done much better possibly because of the borrowers’ familiarity with the functionaries of the society living in the same village.
The RBI study recommended that banks’ procedures have to be made more flexible and simple.
Their response time to the requirements of the poor also has to be shortened if they have to ensure meaningful financial inclusion of the poor.
“It may be necessary that the co-operative institutions, including the primary co-operative societies with their local roots, have to be incorporated in the financial inclusion efforts,” it added.
The self-help groups mostly those under the Kudumbasree, the State’s Poverty Eradication Mission, have emerged as an important agency for parking surplus funds and for giving loans to the poor.
It is both easier and more cost effective if the commercial banks’ linkages with SHGs, particularly the Kudumbasree, are both strengthened and widened.
At present there are more two lakh Kudumbasree SHGs covering 37 lakh women.
Canara Bank audit finds lapses in DCHL books
HYDERABAD, MAY 17:
An audit of the books of Deccan Chronicle Holdings Ltd (DCHL) showed many irregularities, R. K. Dubey, Chairman and Managing Director, Canara Bank, said.
Canara Bank, which had an exposure of Rs 360 crore to DCHL, had conducted ‘scrutiny audit’ of the latter’s books through a global auditing firm.
“The balance-sheet does not reveal exact situation and the company had filed wrong-registration certificates,” he told newspersons here on Friday.
A true financial picture was not revealed and all the loans taken were also not disclosed properly, he added.
“The end-use of the funds has not been established,” the CMD said.
On the recovery of loans, he said he was hopeful of “good” recovery. Of the Rs 360 crore, about 50 per cent was securitised.
“We are doing everything which is possible under the law and also filed a case with the Central Bureau of Investigation,” Dubey said.
Meanwhile, another lender, Kotak Mahindra Bank, had taken possession of DCHL’s printing press at Kondapur here on Wednesday to recover Rs 50-crore dues.
Many other banks, including Andhra Bank, had already identified DCHL properties in Bangalore and Chennai to be sold for recovery of dues.
About six banks which lent over Rs 4,000 crore to DCHL have initiated legal proceeding for recovery.
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