The Hindu : Kerala / Kochi News : Stiffer RBI control over new-generation banks sought

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Friday, Jan 06, 2006

Kerala

Kerala - Kochi

Stiffer RBI control over new-generation banks sought

Special Correspondent

These banks are abandoning norms of banking to boost business: BEFI

KOCHI: New-generation private banks are breaking all the rules in the book and tricking both customers and the Government, Bank Employees Federation of India (BEFI) has alleged.

These banks are progressively abandoning norms of banking ethics to boost their business and profits and are ignoring social banking, BEFI State secretary K.V. George said. "The euphoria over the new-generation banks are fast evaporating in Kerala," he told The Hindu.

The new banks often resorted to tactics used by ``blade companies'' and automobile financing firms (which allegedly employ goonda gangs to recover loans); flout RBI guidelines on lending; and channel credit to non-productive and undeserving sectors.

He wanted the Reserve Bank of India to tighten its control over these banks and take corrective measures. He said that the Banking Regulation Act of 1949 gave adequate powers to the RBI to bridle the illegal activities of these banks.

Mr. George said the December 27 meeting of the State-level Bankers' Committee in Thiruvananthapuram had discussed the violations by the new-generation banks.

The complaints raised at the meeting included use of criminal gangs to recover loans; refusal of education loans and priority-sector loans for the poor; duping depositors by offering higher rates of interest; raising the required minimum balance in order to weed out low-end customers; and generally ignoring the instructions of the bankers' committee.

A couple of weeks ago, aggrieved customers of a bank had held a news conference in Kochi to highlight the harassment they had suffered, including the seizure of a car purchased with the bank's car loan.

This, according to Mr. George, showed that the customers, attracted to these banks by the initial euphoria over better service, were now disillusioned. Such customers were now trooping out and returning to nationalised banks, he said.

He alleged that the new-generation banks were focussing on the more profitable housing, vehicle and consumer-durable loans and on credit card business.

These loans were totally unproductive and made no contribution to the economy. On the contrary, the nationalised banks' focus was on lending to productive sectors, priority sections of society and also on social banking.

BEFI vice-president T.S. Murali alleged that the new banks were not keeping financial discipline.

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