Are private local banks needed to serve common men as suggested by RBI?
RBI's idea of allowing private companies to set up local banks will prove to be a blunder and lead the country back to pre nationalization era.. Already thousands of Non Banking Finance Companies (NBFC) are scattered all over the country like post offices and they are almost beyond the control of RBI and Government of India. Every year we come to know ten or fifteen NBFC promoters have closed their office and flied away from town after cheating crores of money from innocent small villagers , traders and farmers by promising them to double their money in two or three years. Similarly cooperative banks and many regional rural banks in the country are mostly running mismanaged and their assets shown in Balance sheets are mostly irrecoverable.
If small private banks are set up in all small villages, towns and cities, more and more people will be cheated, lending will be done after keeping gold as done before nationalization of banks or credit will be disbursed only after mortgaging landed properties of farmers. Same Zamindari system and exploitation of poor by money lenders in disguise of local banks will come in operation and become the way of life as was prevalent before Nationalization of banks and before freedom of India. It is not exaggeration to say that even now small traders and farmers have to depend on local money lenders and it is also an open secret that these money lenders are charging huge interest and exploiting their poverty.
When RBI is unable to control less than thirty Public sector banks and thousands of NBFC, regional rural banks and cooperative banks already in operation and doing the same job, how can RBI imagine of controlling of additional numerous private banks. If the monitoring is not possible, allowing private companies to set up local banks will prove fatal and make the life of local poor residents more miserbale.Through this new concept of local banks RBI will do nothing but add fuel to fire. Government banks are already in mess and there is no doubt in it. Even farmers and small traders cannot dream of any relief from such local banks for whom Local banks contemplated by RBI will be set up by private companies.
It is to be kept in mind that government can waive loans disbursed by government banks, but cannot force private companies to waive agricultural loan or small loans. Obviously private companies will hold full securities and charge maximum interest from needy person and extort more and more profit as private airlines are looting air passengers keeping in mind the necessity and urgency of passenger. As such, the said idea of local banks contemplated by RBI in not going to help poverty ridden person in any way. Government is indirectly attempting to discard agenda of social inclusion and leave poor person on the mercy of local goondas and local money lenders in disguise of local banks.
Every one knows that private banks cannot allow their assets to become NPA (Non Performing Assets) and cannot depend on the current legal framework and ineffective judicial remedy for willful defaulters. They may also seek the help of recovery agents to apply force on defaulters which government cannot manage to support in our country and which was vehemently opposed by RBI itself in the recent past when private banks like ICICI or HDFC used local goondas to recover their money.
Moreover setting up of lacs of local banks as visualized by RBI and promoted by private companies is against the very concept and plan of Government of India directed towards consolidation of existing banks. It is ironical that on the one hand existing banks are advised by Finance Minister to go for merger and acquisition to reduce the number of banks and on the other RBI is advising private companies to set up local banks. There is no doubt that Government of India must ponder over the idea of RBI , invite opinion from experts and seek opinion of various political parties before putting the said dangerous idea in action.
- SridharLv 71 decade agoFavorite Answer
If you see the history , all Banks were Private Banks, who were performing well not only on the Commercial Point of view but also were diligently respecting the law of the country.They were very particular about the safety of the Investment and the Officers of the Bank's were periodically inspecting and monitoring the performance of the Borrower and the stocks hypothecated to the Bank. The Rules were very stringent that guaranteed immediate closure of the Bank when the bank failed to honour a single cheque for want of sufficient cash.
The reason given for Nationalisation of the Banking system, was that the country needed large scale investment promotion on projcts of public intrest and Private Bank's are not in a position to lead in the direction. Although this has been achieved to a greater extent, and there has been a tremendous growth in the economy and industrial sector, backed by Banking system, with every nook and corner of the country having been covered, still the Rosy picture suggested by the Government before nationalisation has not yet achieved. because due to Political Interference the funds do not reach the needy. Also due to the very attitude of majority of the employees of the Bank, who considers themselves as demi god and look at the cutomers with contempt, in view of their job security and union culture which provides them monthly pay cheque irrespecstive of the inputs they contribute to the Banking system. There were Non Banking Financial Companies existed even prior to Nationalisation of Bank and the people were assurd of stern action and security of their Investment due to the stringent rules against Non performers and failures.
when the Public Sector Banks could not deliver the goods due to excessive load of work and responsibilities the Government mulled to off load the burden and this gave some space for the Private Bankers to enter into foray after decades. Meanwhile, the rules and regulations with lots of relaxations, loopholes and anomalies many NBFCs have also entered into the market with number of
products. It is difficult to monitor all these institutions.
Today the Banking Culture has undegone a lot of changes not only by way of Concepts bue also the functioning outlook. While Private Banks can meet the customers demand and quick actions on Commercial Banking, for which they are already charaging the Customer, they will not be interested in areas of Public Interest The Common man needs the Nationalised Public Sector Banks to leverage the growh of Overall National Poductivity. Although they may be slow in thier functioning and decisions, the weaker section and Projects of Public Interest certainly needs the Public Sector Bank that can extend the massive financial support backed by Government fiat,
What we need is to overhaul the employee attitude and proper HRManagement in the Public sector to stop the Junior Level emploeyee bossing ovr the Management Cadre whch is the present state of affair and Payment linked to the Performance similer to the Private Sector Bank.