Budget Proposal 2014 :--The Narendra Modi government will ask banks to open 200 million accounts in a year from this Independence Day.
The Sampoorn Vittiya Samaveshan Mission aims not just to open bank accounts but to provide people access to other financial services like insurance and pension.Rs 5,000: Instant overdraft for account holders completing a financial literacy programme
Some Important Links on the same issue are given below
As per provisions made in the budget and guidelines to be issued from Government of India ,Public sector banks will have to open 20 crore accounts and each account would be sanctioned an overdraft of Rs. 5000.00 without any discreet inquiry about credit history of the account holder cum borrower.
This way, it is quite clear that Public sector banks would end up lending Rs. 100000.00 crores (one lac crore ) to account holders and these forced borrowers will be without any credit history. Moreover, as the accounts of different PSBs are not linked, there is every possibility of account holders opening accounts in different banks and thus getting overdraft from that banks as well.
Its also reported that department of financial services has already budgeted for defaults. Government of India may subsidise banks to some extent but may not stop promotion of bad culture in lending. It will wondering in dreamland if banker or for that matter GOI expect recovery of such loans which will be considered by poor account openers as charity from GOI , not loan from bank.
Against the above backdrop , it is my question why RBI and IBA do not come in defence of PSBs and protest against any such move which will ultimately result in creation of fresh NPAs for which all the onus will be passed on the bankers for no fault of theirs. Not only this, this year , GOI has tis year suggested a limit of Rs.5000 for all individuals , next year they may ask for increasing the overdraft limit from Rs.5000 to Rs.10000 or Rs.25000 and even more for political advantage. Poor villagers will take it a gift from GOI but banks will suffer the real loss and ultimately bank staff will suffer .
Banks are usually advised to disburse loans as Charity by organising Loan camps and when these loans become bad, same government suggest for waiver of loan or settle these bad loans by offering heavy discounts. All these acts contribute in not only escalation of bad debts but kills the repayment culture and promote bribery culture in bank staff . It is therefore desirable to name these banks as public sector Charity Bank.
Its not hidden from any one that bankers are not legally equipped to recover loans from those whose property is charged in favour of banks, the how come the banks would be able to recover an overdraft given without any credit history and security?
When Bank Management find it difficult to recover the recalcitrant borrowers and wilful defaulters even if they do possess prime and collateral security, how these poor bankers will be in a position to recover small defaulters of Rs.5000/ who have nothing to repay. Obviously such plan as mooted out in above paragraph will prove to be death bell for already ailing banks. GOI may extend some financial help this year or later, but the cannot modify the bad culture they have created and are thus creating in banks to add fuel to fire.
Isn't it really ironical that bankers are being denied a respectable rise in salaries because of huge NPAs and simultaneously something dangerous is under process to create more NPAs?
It is politicians who build pressure for reckless and careless lending . And when the account goes bad, they do not hesitate in blaming bank officials. They build pressure for lending in agriculture and priority sector, infrastructure projects and some other time for some other projects. Banks in general are having huge volume of Non Performing Assets related to loans made for infra structure projects, to power companies, to electricity distribution companies etc ( bulk poison ) and for government sponsored schemes (slow poison
When bad assets increase, profitability falls and when profit falls there is erosion of capital. When this happens , government blames bankers and then GOI through IBA shamelessly deny respectable wage hike to bank staff. It means politicians commit crime and bankers are punished for none of their fault.
How long Public sector banks s would be treated as political tool that too at the cost of banks and bank staff?
Why RBI is silent spectator of this mishappenings and ill-motivated proposals of the government?
Why IBA the forum of Chiefs f public sector bank has become inactive and ineffective and why United Forum of Banks Union (UFBU) are playing in the hands of Ministers and IBA ?
If such brainless and dangerous proposals are put in force, the future of wage hike will further be jeopardised.
Are bank staff in general are also watching the situation with folded hands and praying GOD for their welfare?
Also read Following Links
Evil Culture in Banks
How to Cure Sick Banks
Are Bankers Afraid Of CBI and CVC
Banks To Open 20 crore New Accounts This Year
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