by Subhash Chandra Agrawal
Most private banks in India are indulging in massive irregularities and malpractices with some of these irregularities highlighted in Inspection-Reports of these banks ever since Supreme Court ordered Reserve Bank of India (RBI) making such Inspection-Reports of banks public under RTI Act. RBI should comply with original Supreme Court verdict by making Inspection Reports of all banks public on RBI website. Moreover, it should be mandatory for all banks to put their respective Inspection Reports on their websites including all the previous ones.
Considering vast participation of public-money in private sector banks, all private sector banks must be under purview of RTI Act. Already all employees upto highest post of CMD are public servants according to section 46A of Banking Regulation Act. RBI had to impose restrictions on withdrawal of money for some time on a prominent private sector bank. Former CMD of another prominent private sector Bank is under arrest for serious charges of misappropriation of public-money in the Bank. Inspection Reports of private banks revealed by RBI highlighted gross misuse of public money by top management. Another private sector bank is in notoriety for large number of Non-Performing Assets (NPAs). Heavy fluctuation in share-prices of certain private sector banks tend to doubt regarding safety of public money in private sector banks. Deposit Insurance and Credit Guarantee Corporation (a subsidiary of RBI) has to pay maximum rupees five lakhs from state-funds to each depositor of the bank including those in private sector on its collapses, which is public-funding to declare private sector banks as “public-authorities” under section 2(h) of RTI Act. Closure of PMC Bank in Maharashtra even caused fatalities of several depositors.
Many banks to boost their business provide excessive secured loans more than the real market value of the mortgaged property even though rules allow only some portion of the assessed value of the property for loan-purpose. This must be effectively checked by formulating a rule with retrospective effect whereby banks may be required to close the loan-account in case the borrower surrenders vacant possession of the mortgaged property unconditionally. Study may be made if some ban can be imposed on giving loan on self-occupied residential properties because in case of default, family of the loan-taker is the sufferer for fault/default of the loan-taker.
Many private banks often get blank papers, loan-kits and cheques signed by the borrower and his family-members as guarantors to misuse in case of default of loans. Erring banks even do not give consumer-copy of the loan-kit to the borrowers. System should be that a copy of duly filled loan-kit and cheques may be compulsorily sent by Registered Post to the borrowers, guarantors and a specially set-up section of RBI within seven days of loan-disbursal so as to ensure that banks may not misuse any blank-signed document in case of default. Same should be applicable for Non-Banking-Financial-Companies (NBFCs).
Several private banks have their sister-concerns as Insurance Companies and insurance of the borrower is done by that company. In case of death of the borrower, such Insurance Companies reject the claim on flimsy ground even after having charged insurance-premiums from the borrower, thus harassing surviving family-members of the borrower without paying any insurance-amount towards loan of the Bank. Since banks choose their own insurance-companies for insuring the borrower, onus should be on banks to receive insurance-amount from the insurance-company.
Bank-accounts of government offices, Public Sector Undertakings (PSUs) and state-run corporations (both central and state governments) must be compulsorily only in public sector banks. Rather their employees should also have their salary-accounts in any of the branch of same public-sector bank for getting salaries through simple bank-transfer. Government-employees thereafter may shift funds to any bank of their choice. There were serious allegations of favouritism with a particular private bank for having salary-accounts of employees of a government department in Maharashtra because wife of a heavyweight political ruler was a senior executive in that private bank. Using public-sector banks will increase deposits and profitability of public-sector banks and ensure safety of public-money.
RBI-bonds should be issued only through public-sector banks and companies. Once there was a news-item that China Central Bank had tried to raise its stake in HDFC Bank from .8 percent to 1.1 percent with China Central Bank already holding about 17.5 million shares in HDFC Bank. Even though Indian Government subsequently tightened rules for increasing such stake, yet the episode developed a feeling of uncertainty amongst investors in RBI bonds made through HDFC Bank. RBI-bonds should be auto-renewed, if so desired by investor, on maturity at interest-rate prevailing at time of maturity.
Frequent change of account-numbers by banks should be prevented by making it mandatory for all banks to allot 15-digit account-numbers including in SCSS, PPF and other government-saving accounts with first two digits recognizing the particular bank.
Instead of introducing 5-day week in banks, banks should rather work on all the seven days of the week including even on public-holidays. Bank-employees can be given two-days weekly-off by rotation. Public-holidays can be made banking-days with limited staff by giving some extra bonus to bank-employees coming on duty on a public-holiday. Night-clearing should be introduced so that all cheques deposited by close of banking-hours may be cleared by next morning.
Lok Sabha on 03.12.2024 passed “The Banking Laws (Amendment) Bill, 2024” whereby now it will be possible to have four successive nominations in bank accounts and deposits or else opting for simultaneous nominations. But since presently banks also handle government savings-schemes like DEMAT, Senior Citizen Savings Scheme (SCSS), Public Provident Fund (PPF) etc, provision of successive nomination should be automatically applicable on all such schemes.
Details of nominations should be printed on pass-books also to make it easier for nominee/s to claim deposit-money in case of death of account-holder/depositor. Huge balance is lying in inoperative accounts and unclaimed matured deposits in banks with many account-holders/depositors having forgotten about their bank-accounts. RBI has made Know-Your-Customer (KYC) mandatory also for closing such inoperative accounts. Such cumbersome practice also creates a big loss of man-hours of bank-employees. Frauds are reported through some bank-employees misappropriating funds in inoperative accounts. RBI should direct all banks to inform account-holders/depositors through Registered Post about their existing balance and to approach banks either to make accounts operative or close these in a time-bound period after which all such balances may be transferred to Depositor-Educative-Awareness-Fund (DEAF).
All banks especially public-sector ones should have common and uniform style of forms used for various banking-purposes with provision to download the same after filling on the computer like is facility available for application-forms for passports. Additional facility to email computer-filled forms with necessary enclosures like copies of ID proof, PAN-card etc to the Bank can save huge man-hours of bank-staff in re-filling all details on computer apart from eliminating any chance of wrong entry in computers. Customers can go to banks for verification of such emailed computer-filled forms. System should be formulated whereby all requirements like Minimum Balance, interest-rates, bank-charges and other procedures may be uniform for all public-sector banks.
Writer is Guinness World Record Holder for writing most letters and RTI Consultant
