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Indian banks "hit poor, help corporates" by imposing penalty for non-maintenance of minimum balance in accounts

By Our Representative
In a sharply-worded statement, dozens of civil rights organizations and activists have taken strong exception to India's banks charging penalty for not maintaining a monthly average balance, saying it "directly affects the poor". Pointing out that the banks are doing it "because of their financial compulsions", it gives the example of how State Bank of India (SBI) is doing it despite its huge profits.
"SBI levied Rs 1,771 crores between April and November 2017 as charges from customers who did not maintain their minimum monthly average balance (MAB) in their accounts. SBI’s quarterly profit for the July-September quarter was Rs 1,586 crores. The fine was nearly half of the net profit between the period of April and September 2017, which was Rs 3,586 crores", the statement says, quoting a media report.
The statement says, "On one hand, the government is compelling citizens to open bank accounts and discouraging cash transactions and, on the other, its policies – often haphazard and detrimental to common people’s lives – are forcing banks to levy such charges to cope up with the costs of such policies. Linking of aadhaar-PAN with bank accounts is one such, after the disastrous demonetization."
Calling SBI managing-director Rajnish Kumar's defence in this context "disturbing", the statement quotes him as saying that SBI was planning to raise Rs 2,000 crores as a penalty for non-compliance of minimum balance which it intended to use partly for aadhaar-PAN linking, along with covering for other losses in banking operations.

According to the statement says, "The inordinate push for linking aadhaar to bank accounts, even while the Supreme Court is hearing the matter, shows the level of disregard this government has for law and our country’s legal institutions like Supreme Court."
It adds, "The financial burden of its arbitrary policies is passed on to the poor, working and middle-class customers, who are already burdened with the continuing impacts of decisions like demonetization", which "exemplifies how anti-people this government is."
Pointing out that the SBI had withdrawn it's clause for the penalty for not having minimum balance in May 2012 with the aim of widening its customer base, the statement underlines, "At that time many people shifted their accounts to SBI from the private banks as the private banks were levying a heavy charge for the minimum balance requirement."
However, it notes, "In April 2017, SBI reintroduced this penalty after Reserve Bank of India (RBI) permitted banks to levy charges if customers failed to comply with the minimum balance limit." Ever since then, it adds, the move has been criticized by a "wide spectrum of organizations" as it has been "largely considered an anti-people."
Insisting that the operational losses for banks as identified by Kumar are "marginal when we consider the losses incurred by the banks due to Non-Performing Assets (NPA)", the statement says, "Indian banks have been unable to keep a check on their rising NPAs. According to RBI, NPAs of Indian banks stood at Rs 7,11,312 crore at the end of March 2017, which jumped to Rs 8,29,338 crores by June 2017 and then further to Rs 8,36,782 crores by end of September 2017."
'"Instead of going tough on the defaulting corporate borrowers, public sector banks had wroteoff over Rs 55,000 crore of loans between April and September 2017", the statement says, adding, "It is highly unethical on the part of their part to extract a penalty from the financially weaker account holders for their inability to maintain a minimum balance, instead of recovering the loans given to the corporate customers."
Issued among others by All India Union of Forest Working People, Beyond Copenhagen Collective, Centre for Financial Accountability, Narmada Bachao Andolan, Amulya Nidhi of Nai Shuruwat, Ashok Srimali of Mines, Minerals & People, Bharat Patel of the Machimar Adhikaar Sangharsh Sangathan (Kutch), Bilal Khan of the Ghar Bachao Ghar Banao Abhiyaan, and Himanshu Thakkar of the South Asia Network on Dams, Rivers & People, the statement demands the clause for the penalty due to non-maintenance of minimum be withdrawn.

Comments

samir sardana said…
The Working class of India,are going to lose all their bank funds soon !

The GOI is pushing Indian Banks, to lend for NMP. The private sector has to pay, Rs 7,00,000 crores, to the GOI for the NMP.

These are 1st time or limited expertise entrepreneurs, who will tie up with International JV partners,for the infra projects.

When Indian banks lend to conventional greenfield or brownfield projects,they take an Equitable or English Mortgage,PLUS a hypothecation of specific assets, escrow accounts and Guarantees of Promoters ........., and STILL THE LOANS ARE NOT REPAID,and the bank is left with worthless assets.

The GOI now wants these very banks,to lend to NMP projects,where there is no mortgageable asset.There is only the technical know of the JV partners,and the promoters financial contribution ! The past empirical pattern of cash inflows,from the infra asset - might not exist or might not be material,& WILL CERTAINLY NOT JUSTIFY the NMP loan,to the promoters!

Escrow is NOT a loan security - it is a secured payment gateway !

Still the banks will lend the funds,as the banks are indirectly funding the GOI ,IA the NMP promoter ! So it is a secured loan - to the extent that,if the promoter goes bust - then a new promoter steps in,and loses all the investment in the NMP Project !

In essence,NMP bank loans is a free ride for the promoters,who need to invest just the seed capital to get in a Foreign JV partner,and JV funds,and then take the balance,from the banks. The promoter has to TRY HIS BEST,to drive efficiencies and ALT revenue streams - and if he succeeds - HE HAS A JACKPOT.If not,a NEW PROMOTER comes in.

A bank which cannot appraise a steel NPA - will OBVIOUSLY not be able to appraise the FORECASTED EFFICIENCIES OF THE NMP projects.SO IN COMES THE "CONSULTANT" - whose report will be relied upon by the BANKS - as such.All the NMP consultants used by the GOI and the Banks, HAVE BEEN ON THE PAYROLL,OF THE INTERNATIONAL AND INDIAN INFRA COMPANIES !

As a thought - the GOI could have hived off the NMP assets,into a SPV and raised International funds and Bank loans ! Y do a lease ? The terms of funds would be better for the GOI,in a SPV ! The JV partners in the SPV,would drive EFFICIENCIES - and there would be no need for the GOI,to share the EFFICIENCY PROFITS with the lessee !

SO Y DID THE GOI DO THE LEASE MODEL ?

U GOTTA BE KIDDING ME ! dindooohindoo

THE GOI WANTS THE PANWARI BANIAS TO MAKE BILLIONS,AND THEN SHARE IT WITH THE BJP !

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