Proportional Representation for Financial Inclusion

Proportional Representation for Financial Inclusion

Financial inclusion has to be taken seriously by bankers who seem to be more interested in providing various facilities to those who are already a beneficiary of national banking system

By Prabhakar Kulkarni

The Union government is undecided whether to continue the Reserve Bank of India (RBI) as an autonomous body or to bring it under a regulatory authority nominated by the government. Besides various reasons, one vital reason is the requirement of enough strength to control and regulate vast network of national banking system. Currently, the RBI lacks effective mechanism to monitor banks’ working style in nationalized, scheduled and co-operative sector. Banks in these sectors are following their own monetary strategies without due consideration of what both the public and the government wants. Specific guidelines and policies are publicized in public announcements and RBI’s press releases. But banks seem rather slow in responding to the schemes or are inclined to sidetrack the statutory guidelines. This is more so in view of new policy of demonetization and curbing black money.

The very formation of banks boards needs some basic change and both the government and the RBI should see that the boards of nationalized banks in particular are so formed that they represent various sectors of economic activities including common consumers as also the farm sector. While bureaucrats and those representing affluent sections of Indian economy should be included, those representing valid interests of the neglected sectors like small scale industries, low wage earners, small farmers and common consumers are also expected to be included and make a monetary policy in larger interests of public in general.

The much discussed financial inclusion is also expected to be taken seriously by bankers who seem to be more interested in providing various facilities to those who are already getting them. As the Union government and the RBI want more than fifty percent of population which is not getting any banking facility to be included in the financial inclusion program, bankers are expected to take special efforts to bring the neglected sectors and people into the banking network. No frill accounts to be opened without any credit balance and that too for those who are deprived of the banking facilities because of poverty should be considered by banks on priority basis. They should take special efforts for opening such accounts. It is high time that bankers, both officials and employees who enjoy various facilities by way of paycheques and perks mostly because of their organized strength and persistent demands should now   be alert and enthusiastic in implementing schemes for the poor and the neglected sections of our society.

The financial inclusion and no-frill accounts are specifically meant for those having no bank accounts in rural areas. But the one of the nationalized banks seems to have carried out the scheme in and around the hutments around Mumbai and has claimed that it has achieved the aim of financial inclusion. (This claim seems to be gloriously mentioned in its house organ.) 

While hutments in city areas are selected by one bank another bank, refers to the specific guideline that the scheme is meant for rural areas. But the same bank has opened no-rill accounts of teachers who are regular wage earners and can keep the required balance and are not in need of such no-frill accounts. Strangely enough, the bank has mentioned this as its achievement in its advertisements as the scheme of “No Frill Wage Accounts Scheme.” 

One can be shocked to find the diversion from no-frill accounts specially meant for those who cannot keep minimum balance to those wage earners who can afford to keep the balance and who are not in need of no-frill accounts. Now banks have responded to urban citizens to allow them use the same facility of ‘no frill’ account because cylinder gas companies who are to refund the subsidy amount to gas consumers want them to have an account only in nationalized banks and not in co-operative banks.    

Banks are expected to carry out schemes which are specially meant for the poor and the neglected sections of society. For instance, the scheme to grant loan to poor and deserving students for higher education is not duly followed by banks and there are complaints which are not normally taken note of by the RBI. A decision by a district Consumer Forum indicates as to how banks try to avoid granting loans to deserving students on some pretext or other. A nationalized bank’s branch sanctioned Rs 7 lakhs to a student and formalities of legal documents like stamp, two guarantors and insurance policy of Rs 7 lakhs and opening account in his name were duly completed. But the bank even though agreed to send the amount as fees to the concerned University in America actually did not send the amount and later denied to disburse the amount on the pretext that the student’s father has some loan liability of other banks.

In fact the very scheme of educational loan is for the students who want to take higher education if they have no financial backing and loan burden of their parents need not be considered and repayment liability is responsibly of the students who are expected to pay after completion of education and getting employment. In the  Forum’s decision it is pointed out that the RBI has issued a specific circular of the scheme in which there is no condition that loan should not be given if parents are borrowers of other banks. Hence the denial by the bank on the pretext that his father is borrower of other banks is not legally sound and Forum ordered that the bank should disburse the amount of Rs 7 lakhs; pay Rs 5000 for mental torture and Rs 2000 for costs. In this context it should also be noted that banks are asking for collateral security or guarantee of parents for education loan amount up to Rs 4 lakhs even though the RBI has stated that for such low amount no guarantors or security is required. Some banks are referring to CIBIL for the report of parents’ credit report and if it is negative loans are denied.

There are number of other such decisions which are not duly communicated to the RBI. The Court’s decisions and other complaints against the banks in nationalized, private and co-operative sector need to be taken note of by the RBI which is expected to create effective mechanism to check and prevent the objectionable banking activities. 

A considerable number of complaints against banks and are voiced by consumers, depositors and investors in print media in regional language newspapers. The consumer forums’ decisions in various parts of the country are widely covered by regional language newspapers. The way banks behave with consumers and even flout Consumer Court’s decisions is disclosed in reports published in regional language newspapers. The harsh recovery procedure, harassment by muscle power engaged by banks for enforcement to recover dues and other irregularities contrary to RBI’s instructions are periodically exposed in the print media. By proportional representation on boards, these matters would be duly considered for better services to common and needy consumers in the banking sector.