B – Banking #AtoZChallenge #BlogchatterA2Z
Banking is the institution that has taken the biggest toll with respect to its credibility during the last five years. With the government dumping most of the reports that are produced by either the government agencies themselves or come out as a part of PILs / RTIs, the integrity becomes questionable.
The only time when during the tenure of five years, the RBI has become so weak losing two governors in the process. But a common man cannot ask questions to the government.
The thing that goes in the favor of the government is the Insolvency and Bankruptcy Code introduced in 2016, was passed in parliament to address the issue of NPAs. The code allows either the creditor or the borrower to approach the National Company Law Tribunal (NCLT) to initiate insolvency proceedings
The other big plus is the much-publicized Pradhan Mantri Jan Dhan Yojna (PMJDY) which was a renaming of the ‘Basic Savings Bank Deposit Accounts (BSBDA) scheme of the previous UPA government. In 2012, the ‘no-frills account’ was renamed as ‘Basic Savings Bank Deposit Accounts (BSBDA).
Let’s get straight to some facts and data.
The present government has been very vocal in listing out that they have inherited most of the NPAs from the previous regime and they are the ones who have kept a check on it.
As per an Economic Times report, Gross non-performing assets on public sector banks surged to Rs 7.8 lakh crore as of December 2018 from Rs 2.4 lakh crore in June 2014. Private sector banks have too witnessed a substantial increase in bad loans in the last four years. I don’t need to say much on this, it is for everyone to decide.
Moving on to the other issue of bank accounts. An astonishing amount of about 32 crore bank accounts were opened in the PMJDY. At least 18 crore accounts were opened in rural and semi-urban centers while more than 13 crore accounts opened in urban metro centers.
The opening of bank accounts is one thing but their actual contribution to the inclusion of unprivileged in the mainstream is another.
The accounts opened under the PMJDY are zero balance account, that means banks cannot levy any charges for not maintaining the MAB. The other benefits include insurance cover of Rs. 30000 and overdraft facilities and many individuals who already have bank accounts may have had accounts created for them, lured by these facilities.
“Our preliminary estimation shows that around 25 percent of accounts are a repeat or multiple accounts opened by people already holding accounts in different banks,” said G S Sandhu, secretary for financial services in the ministry of finance.
According to a paper published in May 2017 by Manuela Kristin Günther from the Overseas Development Institute, 90% of Indian households have at least one bank account as opposed to the government’s claim of over 99%. Of these, the paper pointed out that 79% of the households with Jan Dhan accounts also have a regular bank account.
On top of this, even a statement from the current finance minister says that about 22-25% of these are lying empty.
On average a bank account costs Rs. 125 to the bank to maintain that account. Apart from charges related to non-maintenance of MAB, SBI had an annual maintenance fee of Rs 125-300 for debit cards depending on the category of the card.
Nobody questions how much it is costing the government to maintain these accounts and whether these accounts are actually serving the purpose they were supposed to.
In the past four years, 25 banks – including public and private sector banks have collectively collected 11500 cr for not maintaining MAB, which is more than the total money owed by Vijaya Mallya.
To be honest, it usually the poor and the lower middle class who is unable to maintain the minimum account balance. When you want to encourage people to use more of mainstream banking then you should incentivize it rather than penalizing. What happened to the ‘cashless economy’ after demonetization? As per RBI, the cash in circulation is even more than what it was pre-demo. PMJDY is heading in the same direction
A single account opened in United Bank of India, under the Pradhan Mantri Jan Dhan Yojana (PMJDY), or the ‘no frills’ or Basic Savings Bank Deposit Account (BSBDA) had a whopping Rs 93.82 crore deposited.
These accounts have become an easy place to launder money and without proper checks and the government shelving reports after reports the NPAs and Black Money is not going anywhere.
For all those who are fed up with the policies,
For all those who hate fines,
For all those who hate NPAs,
For all those who are in Banking…
It’s not a goodbye,
But it’s a GOOD BYE
Manas ‘Sameer’ Mukul
This is the second post for the #AtoZChallenge #BlogchatterA2Z. My theme in Politics Category is ‘IPL – Indian Parliamentary League’, where I would be covering some relevant issues with the General Elections 2019 through the course of 26 posts.
‘B – Banking’
Read the previous post here
Please do visit tomorrow for the next post with letter ‘C’
I am also taking part in the #AtoZChallenge #BlogchatterA2Z using another theme – ‘Dubai – City of Gold‘. If you love travel head over to the Travel Theme and share your feedback.