RBI has been losing credibility since demonetisation. Its subsequent efforts like not intervening when Bank charges were increased, proposing banking licences to corporates which RBI all along opposed on well found principles, allowing more FDI into Banking Sector, relaxing Priority Sector Lending norms, not handling PMC Bank crisis properly but intervening in Yes Bank crisis, transferring contingent fund to the Central Govt etc have brought down the credibility of RBI.

‚ÄčFour recent developments further add to the anger against the RBI, which has become a puppet of the Govt and the Corporates.

‚ÄčOne, RBI has permitted Banks to increase the ATM  charges which was NIL at one point of time to Rs 21+GST if the ATMs are used more than 5 times in same bank ATM and more than 3 times at other Bank ATMs. At times people use the ATMs for seeing the balance first and then withdrawing. That becomes two transactions. Common man is going to suffer by these measures. The branches have reduced staff and customers are asked to use the ATM. For withdrawal at the branch, the customer need not pay, but at the ATM they are forced to pay. This is injustice. You can write off lakhs of crores of rupees for the Corporates, but squeeze ordinary people!

‚ÄčSecond, RBI has uploaded a paper on its website called the ‚ÄúConsultative document on Regulation of Micro Finance‚ÄĚ. The document quotes Sa-Dhan Document for Data. Sa-Dhan is a network of Rich Corporate type Non Banking Financial Companies ‚Äď Micro Finance Institutions.  They don‚Äôt have any statutory powers. The document is also using World Bank Data to justify its recommendations, which are totally against the weaker section of the society. The main recommendation is the removal of any ceiling on Interest Rates and giving authority to the NBFC-MFI Boards to decide the Interest Rates.

‚ÄčSome existing regulations are removed in the proposal, of which the following are detrimental to poor borrowers.

  1. Removal of ceiling on maximum loan, which can lead to excessive indebtedness.
  2. Tenure of the loan not to be less than 24 months.
  3. No more than two NBFC-MFI can lend to the same borrower.

The MFIs are already exploiting the poor, but they get cheap loans from Banks. This is injustice.

Third, RBI Bulletin data shows that during the year 2021-22 so far Industrial Credit growth has gone down by -0.8%. Beverages and tobacco have gone down by -5.4%, petroleum, coal & nuclear fuels by -19%, cement and cement products by -14%, basic metal and metal products by -12%, and all engineering by -4.2%. The RBI has not taken any efforts to ensure credit to these sectors which generate employment. The banks are flooded with deposits.

‚ÄčFourth is the dilution of Priority Sector Lending norms.

‚ÄčLoans against pledge/hypothecation of agricultural produce (including warehouse receipts) for a period not exceeding 12 months subject to a limit upto Rs.75 lakh against NWRs /e NWRs and upto Rs.50 lakh against warehouse receipts other than NWRs /e NWRs.  This will help the rich and the hoarders.

‚ÄčLoan disbursed to NBFC ‚Äď MFIs and other MFIs will be classified as Priority Sector Loans.

‚ÄčThis will encourage banks to lend to MFIs instead of lending to SHGs directly at around 10%.  The MFIs will avail loans at say 10%, but lend to borrowers at 24% or more. This is total exploitation of the poor. This is injustice.

In additions to these, banks can become co-lenders with other Non Banking Financial Companies to the Priority Sector.  Once again, increasing the borrowing cost for the borrowers.

‚ÄčThese measures clearly indicate the discrimination against the poor by the RBI while favouring Banks and Corporates. Many Corporates have their own NBFCs.

‚ÄčIt‚Äôs high time the RBI reverse its policies favouring the rich at the cost of the poor. Otherwise, it may become Richmens‚Äô Bank of India

Thomas Franco is former General Secretary of All India Bank Officers’ Confederation.

Picture courtesy: Bruce Fryxell/Flickr   

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