Our Money, Our Right
Towards a Transparent and Accountable Financial and Banking System
Appeal to political parties by people’s movements, civil society organisations, trade unions and concerned citizens on finance and banking, with a request to include these in your election campaign for 2019, including in the election manifesto.
The finance and banking sector have never been as precarious as it is today. The mounting NPAs, demonetisation, proposed bank mergers, weakening of RBI, crippling the economy by introduction of GST, charging the customers for basic banking services taxing them and pending Wage Revision for Bank Employees are only a few amongst the various ways in which the policy changes manifested, affecting not just the citizens, but the economy of the country, shaking the foundations of our financial system and Public Sector Banks.
The upcoming general elections in 2019 will be crucial in many ways, particularly for the financial and banking sector. It will be an opportunity for political parties to commit to correct the past mistakes and take proactive initiatives to put systems in place for strengthening the sector and making it transparent and accountable.
It is in this context that this appeal to you. We hope that you will include the points raised here in your manifesto, as well as in your election campaign.
Should you prefer a meeting, an opportunity for us to present the key aspects of this note, some amongst us would be happy to meet you and further discuss these.
Whitepaper on Demonetisation
Demonetisation, which rendered 86% of the currency at the time of its announcement invalid. The stated objectives were, unearthing black-money, stopping terror funding, abolishing corruption and checking counterfeit currencies, has imposed unaccountable miseries on people. With more currency in circulation than at the time of demonetisation, with over 99.3% demonetised currency returning to banks, with increased cases of counterfeit currencies, corruption and terror activities there is no evidence that the purpose of demonetisation was ever met. Yet, the unorganised (informal) sector which constitutes country’s 83% of the workforce was shattered. More than 100 people died due to hardships imposed due to demonetisation, over 100 cases were filed against people holding a huge amount of fresh currency and few bankers (especially in private banks) of aiding hoarding of new currency. The only sector, which benefited from it seems to be the Fintech companies. The Parliamentary Standing Committee on Finance could not complete its enquiry because BJP MPs stalled the process.
After two years, it is very clear that demonetisation did nothing to achieve its stated aim, but on the contrary, has destroyed a major part of the economy, that was a source of livelihood for the poor, lower and middle class.
We demand a whitepaper on demonetisation, capturing the economic and social costs and benefits of it. The purpose, objectives and the outcome of demonetisation require public scrutiny, which we expect to happen through the whitepaper on it and its presentation in the Parliament.
Addressing NPA crisis
The central problem of the Indian banking industry is the piling of Non Performing Assets (NPAs) worth over Rs. 10 lakh crore, which have accumulated on account of faulty lending practices, which favoured Corporates. The RBI and the government chose to not intervene between 2008 and 2014 but rolled out a series of restructuring and readjustment policies, Prompt Corrective Action (PCA) that was not prompt, all of which contributed to intensifying the crisis. Instead of timely and stringent actions on the defaulters, the RBI and the government policies focused on tightening the banks. From the restructuring policies, introducing Insolvency and Bankruptcy Code (IBC) that resulted in huge haircuts, the merger of banks, and attempts to privatise banks have only been detrimental to the banks and helped the defaulters. This shows the lack of political will to address the issue of NPAs in a fundamental way. Even the recommendations made by the Parliament Standing Committee in Feb 2016 are ignored.
We demand publication of defaulter lists, transparent recovery measures, assets recovery procedures including attaching of properties and sale, along with a moratorium on wilful defaulters, companies and their offshoots, from accessing any fresh loan or restructuring.
We demand strict action against defaulters. Commercial banks should keep away from high-risk lending and instead let a new development bank take the role of long term, high-risk lending, as recommended by Standing Committee on Finance, in its report on the Banking Sector in India – Issues, Challenges and the Way Forward(May 2018), a comprehensive social and environmental safeguard policy to ensure the risks related to litigations and delays due to negative impacts on people and environment are mitigated are essential to fundamentally address the NPA crisis.
Strict Action Against Wilful Defaulters
More than 82 per cent of the NPAs are due to corporate defaulters. One-third of that belongs to just 40 Corporates. The government and the RBI have not released the name of the wilful defaulters, nor has there been any actions against them. Even the list of written off accounts are not made public allowing them to cheat another bank. The PSBs should be empowered to take strict action against wilful defaulters, thereby recovering the bad loans and setting deterrence to the potential violators of loan terms in future. We demand that the names of the top 500 wilful defaulters should be made public. There has to be criminal procedures against the wilful defaulters.
The destructive interference in the operations of key institutions was the hallmark of this government and the case of Reserve Bank of India was no different, jeopardising its independence. Using its Board as a rubber stamp to legitimise demonetisation was just one of them. Appointment of RSS ideologues at its Board only confirms the fear of turning critical institutions such as RBI as pawns of the government. Attempts to dig deep into RBI’s reserves to bolster its capital requirement to announce sops with elections round the corner exposes the myopic vision of systems and structures for economic stability. We demand complete political non-interference in the functioning of RBI and instead should take steps to strengthen its independence. Appointments to its Board should be made more stringent and transparent, based on experience and expertise rather than ideological leanings. Accountability should be fixed on RBI with a stronger reporting system to Parliament and better transparency.
Political Interference in PSBs
The political interference in the functioning of public sector banks (PSBs) has promoted crony capitalism and corruption. This has resulted in mounting non-performing assets (NPAs) and the political patronage for certain corporations crippled banks’ will to recover money from the defaulters. We demand complete political non-interference in the operations of PSBs and incentivise prudent recovery of bad loans. Instead, Accountability should be fixed on the Chairman, MD and Board of Directors.
In the history of Indian Banking, depositors of PSB have never been under such tremendous pressure like the last four years. With policies like demonetisation that resulted in country-wide chaos, the FRDI Bill that sent panic that depositors might lose their savings, the increased and huge charges on banking transaction and the imminent threat of bank privatisation has all contributed to many even closing accounts with PSBs.
As attempted in the failed FRDI Bill, depositors are now being made to be stakeholders for the losses of the banks. Hence, we demand that depositors should be empowered with full disclosure by the bank about investments of their deposits and the risks involved and mitigation plans. Depositor should have the right to assert not to invest in certain sectors, which are proven to be detrimental to humans and nature. Depositors should be provided with policies, which guide the investments of their bank. Banks should not impose charges on depositors for basic banking services.
Service charges on banking services have increased drastically in the previous few years. Primarily, banks are in the loss due to increased non-performing assets and provisions needed for them. The loss has been caused by corporate defaulters but the burden of this loss has been shifted to common people in the form of increased bank charges despite the fact that these charges amount to merely 1% of the total amount of bad loans. Depositors are being charged for almost every banking service such as cash transaction at branches, ATM transactions, change in ATM pin code, change of mobile number or address, SMS alerts, changes in KYC related documents etc. The Government along with the RBI must come up with clear guidelines for banks to stop charging customers for each and every banking service and take actions against real culprits who have caused the loss to banks.
Strengthening rural and agricultural credits
Agriculture is the backbone of our economy. Keeping this in mind, in the nationalisation era, PSBs had taken efforts to improve agricultural credit by having mandatory priority sector lending. Further, the direct credit within the priority sector also aided in the credit needs of farmers. But changes in such policies and including agro-based industries for priority sector lending has severely affected credit flow to the farmers.
After nearly three decades of economic liberalisation, farmers are worse off and indebted. There’s an alarming rise of debt in the farm sector. Banks having nearly withdrawn from rural and small agricultural credit, farmers were forced to approach informal credit sources, consequences of which was unfolding the past many years in the form of suicides of thousands of farmers.
We demand that farm loans of small, marginal and subsistence farmers should be written off. And banks should step in to support the sector by providing credits. Crop Insurance should be done by Public Sector Insurance Companies and not by private companies like Reliance.
Strengthen the devastated unorganised sector and small businesses
Demonetisation had the maximum impact on the unorganised sector and small businesses. GST has made it only worse. They, being the largest workforce in the country, contribute more than half of our GDP, priority should be given to the sector to rebuild and restore it. They require seed money for start-ups, Equity Support, Loans, marketing support and common support services.
Transparency and Accountability
‘Sunlight is the best disinfectant’. The absence of transparency and accountability at all levels of appointments and decision making has been fundamental to the cancer of crony capitalism, corruption, underperformance, loss-making and the monumental social and environmental costs, which the irresponsible investments are causing. We demand mandatory policies pertaining to transparency and accountability for all banks, including RBI, NABARD, SIDBI and Private Banks.
Banking Activities without Banking Licence
There are many Fintech companies, which are into lending which is a banking activity. There are no supervisory mechanism or Licence. They charge huge interest. They have to be immediately brought under RBI supervision.
Social and Environment safeguard policies
Large-scale development projects have been seen as imperative for the economic and social growth of the country. But, such projects have had adverse effects on the lives of people in project areas and also have done irreversible damage to the environment. The civil society movements have raised these issues with financial institutions funding such projects. Coming under the pressure of such movements major multi-lateral development organisations had included social and environmental safeguards to their investments. These remain one of the tools of holding these institutions accountable.
National financial institutions especially the public sector banks are today primary lenders for such developmental projects in India. But PSBs do not have any mandatory guidelines to ensure that their investments do not cause harm to the common people of the country and destroy the environment. This coupled with lack of due diligence and reckless lending have also caused a severe crisis within the Indian banking sector. Hence there is a need to develop robust safeguard policies.
Appointment of Employee Director / Officer Director
The board of the banks is where decisions, inter alia, of the large scale loans are decided. Unfortunately, the posts of the employee director at the PSBs have been left vacant for far too long and thus preventing their voices at the Board has been a strategy of this government.
As crucial stakeholders of the decisions of the banks, employees have to be a part of this decision making. We demand the immediate appointment of employee director in all PSBs and policies to ensure that such appointments are not delayed in future.
The government says its plan to merge one weak bank with two stronger banks will help to mitigate the burden of bad loans and further increase the lending capacity of the amalgamated entity. The merger may help clean up bad loans of the weak bank, but it would also necessitate more provisions by the new bank. Further, the new bank lending to the same large borrowers, without recovering existing bad loans will only result in more loss for the bank. Not just commercially unviable, but a three-way merger among banks with different administration will only result in administrative chaos.
Mergers cannot resolve or clean up the balance sheets; rather the NPAs of the three merged entities would simply add up. The improvement in certain ratios, if any, would amount to mere financial engineering, without resolving the actual problem. Should learn from the mistakes of merging SBI with Associate Banks.
Public Sector Banks have been the driving factor of the Indian economy since the nationalisation of banks in 1969. While private banks are confined to urban areas, with no branches or nearly no services in rural areas, PSBs serve one and all. Policy changes and political interference in recent years have weakened and made them vulnerable, mounted the burden of non-performing assets and ended up charging for their services, hitting the poor the most. These are weakening the PSBs and steps like bank mergers are steps towards privatisation of PSBs and it should be vehemently opposed. Going forward, the PSBs must be strengthened, help them recover the bad loans from wilful defaulters and remove the bank charges introduced in the recent past and ensure its independence without political interference. We request you to give all assurance that “ Public Sector Banks will be strengthened and No Privatisation of PSBs”
- There should be greater relaxation for MSMEs for GST compliance, as the GST system invariably discriminates against MSMEs vis-a-vis large companies, as a large amount of working capital of MSMEs has to be devoted towards GST compliance.
- There should be a lower tax rate for mass consumption goods, which should be compensated by levying a higher tax rate for luxury consumption goods.
- The tax collection targets of the Government should come more through a progressive direct tax system, with higher tax rates for individuals in the high-income category. GST or any such indirect tax is regressive as it puts more burden on people from economically weaker sections.
- States should have a higher representation in GST council for determining the tax rates, on the lines of federal cooperation, which would also lead to offsetting the higher amount of control with the central government through a mechanism like GST.
Development Financial Institutions
Development Financial Institutions were established with the purpose of financing the mid and long-term large development projects and they have played a paramount role by contributing to the industrial growth and overall growth of the nation. During India’s economic liberalisation, these banks were slowly eliminated or transformed into commercial banks. With the dismantling of development banks, the scheduled commercial banks were forced to engage in long term lending, which parked the considerable part of banks’ capital and led to a shortage of capital for other banking activities. Additionally, banks adopted aggressive lending practices and issued big loans without due diligence increasing the non-performing assets to an unprecedented level. The Standing Committee on Finance, in its report on the Banking Sector in India – Issues, Challenges and the Way Forward(May 2018) also made the recommendation to go back to the previous model of development banks for medium and long-term lending. The government should make sure that there are adequate development banks to provide long term lending for development projects so that commercial banks can focus on short term lending and other economic activities.
Parliamentary Oversight on IFIs
While their lending has been minimal, the influence of the International Financial Institutions (IFIs) on our economy and our policies have been disproportionate to the lending volume, facilitating and augmenting changing the fundamental structure of the public sector, many of them privatised at throw-away prices. Yet, Parliament does not have a role when negotiations are underway with the IFIs. The highest law-making institution of the country is handed down a decision made by the IFIs and bureaucrats, without a thorough deliberation on its impacts on people and the economy. We demand a Parliamentary oversight of all IFIs at all stages of negotiations, decision, monitoring and post evaluation of lending, to ensure that the country’s interests are not compromised.
Ease of Doing Business Ranking
In a hurry to jump ahead in the Ease of Doing Business rankings, the government has reportedly taken 10,000 steps, most of it amending policies, as acknowledged by the Prime Minister. These policies are related to labour and environment standards, eliminating public hearing from the approval process for certain projects and diluting forest and land use policies. Considering the devastating impacts this could have on people and economy, we demand that the amendments are made to only strengthen the policies and wherever it has diluted or weakened it, it should be reversed.
Strengthen Co-operative Banks and Co-operatives
Co-operative Banks and Co-operatives like primary Agriculture Co-operatives are the ones catering to the poorer sections of the societies. They are neglected and there is an effort to privatise urban co-operative Banks. They have to be strengthened through NABARD and not allowed to dilute their goals.
Support RRBs and Stop Efforts to Merge Them
Regional Rural Banks are doing a yeomen service in rural areas. From 198 their number has been reduced to 56. There is another attempt to merge them state wise. This will defeat the purpose for which they were initiated. They have done well and they should be strengthened.
Because of people’s relentless campaign, the Financial Regulation and Deposit Insurance (FRDI) Bill was withdrawn by the government, which otherwise would have risked depositors savings and would have jeopardised the existence of PSBs. However, the government is trying to bring in elements of FRDI Bill through different legislation.
We demand that such a move is reversed and resist the attempts of the Financial Stability Board to meddle with our banking system.
Corporate tax wave off
The government should end the practice of waving off corporate tax year after year. The average corporate tax waiver the past few years have been more than Rs. 5 lakh crore per year – which is nearly one-fifth of the Union budget of past years.
Parliamentary Standing Committee Proceedings
Proceedings of Parliamentary Standing Committee on Finance should be made public and aired live to the citizens enabling them to watch and follow them, like in many other democratic countries. Such transparency would not only enhance accountability amongst and members and parties involved but also ensure active and responsible citizenry.
Accountability of Regulators
The Regulatory Bodies should be accountable to the Parliament – submitting regular reports, which in turn is made available to the public. The Regulatory Bodies should engage with and consult investors, depositors, policyholders, pensioners or borrowers regularly to take feedback and in fine-tuning the policies of regulation. The appointment and/or extension of tenure of the Chairpersons should be decided by a Parliamentary body, not just the Finance Minister and/or Finance Secretary as it is practised now.
- Medha Patkar, Narmada Bachao Andolan
- H. Venkatachalam, All India Bank Employees Association (AIBEA)
- Thomas Franco, Former Gen. Secretary, All India Bank Officers’ Confederation (AIBOC)
- Sucheta Dalal,MoneyLife Foundation, Mumbai
- Madhuresh Kumar, National Alliance of People’s Movements, New Delhi
- Leo Saldanha, Environment Support Group, Bangalore
- Peter, National Fishworkers Forum
- Soumya Dutta, Bharat Jan Vigyan Jatha
- Ulka Mahajan,Sarvahara Jan Andolan, Maharashtra
- Financial Accountability Network, India
- R. Bhatt, Former Chairman Corporation Bank Officers’ Organisation
- Beyond Copenhagen Collective/MAUSAM, India
- Working Group on International Financial Institutions (WGonIFIs)
- Dunu Roy, New Delhi
- Sreedhar Ramamurthy, Environics Trust, New Delhi
- Centre for Financial Accountability, New Delhi
- Bharat Patel, Machimar Adhikaar Sangharsh Sangathan, Gujarat
- Wilfred D’Costa, Indian Social Action Forum (INSAF), New Delhi
- K. Agarwal, General Secretary, Union Bank Retiree’s Association, Uttar Pradesh
- Krishnakant Chauhan,National Convenor, National Alliance of People’s Movements, Gujarat
- Kalyani Menon-Sen, Feminist Learning Partnerships
- Rajendra Ravi,People’s Resource Center, New Delhi
- Ram Wangkheirakpam, Indigenous Perspectives, Manipur
- Sanjeev Kumar Danda, Delhi Solidarity Group, New Delhi
- Shripad Dharmadhikary, Manthan Adhyayan Kendra, Pune
- Vimal Bhai, Matu Jan Sangathan, Uttarakhand
- Anil T. Varghese, Delhi Forum, New Delhi
- Xavier Dias, Former Editor, Khan, Khanij aur Adhikaar, Ranchi
- Awadhesh Kumar, Srijan Lokhit Samiti, Madhya Pradesh
- Magline Philomin, Teeradesa Vanita Federation, Kerala
- Himdhara Collective, Himachal Pradesh
- Suhas Kolhekar, Pune (Maharashtra), Convener, National Alliance of People’s Movements
- Sunita Rani Minj, Domestic Workers’ Union, New Delhi
- Chutka Parmanu Virodhi Sangharsh Samiti, Madhya Pradesh
- IOC Virudha Samara Samiti, Kerala
- Bargi Baandh Visthapit Avam Prabhavit Sangh, Madhya Pradesh
- Mahendra Yadav, Kosi Navnirman Manch, Bihar
- Intercultural Resources, New Delhi
- Equations, Bangalore
- Odisha Chas Parivesh Surekhsa Parishad, Odisha
- Karamuttil Samara Samiti, Kerala
- Karimanikal Youth Movement, Kerala
- Sagara Ayal Koottam, Kerala
- Secretary, Andhra Pradesh Bank Employees’ Federation
- Secretary, Gujarat Bank Workers’ Union
- Secretary, Bihar Provincial Bank Employees’ Association
- Secretary, Bengal Provincial Bank Employees’ Association
- Secretary, All Kerala Bank Employees’ Federation
- Secretary, Delhi State Bank Employees’ Federation
- Secretary, Karnataka Pradesh Bank Employees’ Federation
- Secretary, Maharashtra State Bank Employees’ Federation
- Secretary, Madhya Pradesh Bank Employees’ Association
- Secretary, All Orissa Bank Employees Association
- Secretary, Punjab Bank Employees Federation
- Secretary, Rajasthan Provincial Bank Employees’ Union
- Secretary, UP Bank Employees’ Union
- Secretary, Haryana Bank Employees Federation
- Secretary, Tamil Nadu Bank Employees’ Federation
- Secretary, Jammu Provincial Bank Employees’ Federation
- Secretary, All Manipur Bank Employees’ Association
- Secretary, Meghalaya Bank Employees Association
- Secretary, Himachal Pradesh Bank Employees’ Federation
- Secretary, Eastern Maharashtra Bank Employees Association
- Secretary, Jharkhand Pradesh Bank Employees Association
- Secretary, All India Allahabad Bank Employees Co-ordination Committee
- Secretary, All India Andhra Bank Award Employees’ Union
- Secretary, Federation of Bank of India Staff Unions
- Secretary, All India Bank of Maharashtra Employees Federation
- Secretary, All India Bank of Baroda Employees’ Co-ordination Committee
- Secretary, Canara Bank Employees Union
- Secretary, All India Central Bank Employees Federation
- Secretary, Corporation Bank Employees’ Union
- Secretary, All India Dena Bank Employees’ Co-ordination Committee
- Secretary, Federation of Indian Bank Employees Union
- Secretary, All India Oriental Bank Employees Federation
- Secretary, All India PNB Employees’ Federation
- Secretary, All India Punjab & Sind Bank Staff Organisation
- Secretary, Syndicate Bank Employees’ Union
- Secretary, All India UCO Bank Employees Federation
- Secretary, All India Union Bank Employees’ Association
- Secretary, United Bank of India Employees’ Association, Central Federation
- Secretary, Vijaya Bank Workers’ Organisation
- Secretary, All India State Bank of India Employees’ Association
- Secretary, Indian Overseas Bank Employees Trade Union
- Secretary, Tamil Nadu Mercantile Bank Employees’ Union
- Secretary, Kotak Mahindra Bank Employees’ Union
- Secretary, The Catholic Syrian Bank Staff Association
- Secretary, Dhanalakshmi Bank Employees’ Union
- Secretary, Federal Bank Employees’ Union
- Secretary, All India Karnataka Bank Employees’ Association
- Secretary, Karur Vysya Bank Employees’ Unions
- Secretary, HDFC Bank Employees’ Union
- Secretary, Ratnakar Bank Employees’ Union
- Secretary, Nainital Bank Staff Association
- Secretary, All India Citi Bank Staff Federation
- Secretary, All India Bank of Tokyo Employees’ Association
- Secretary, Bank of America Staff Union
- Secretary, All India French Bank Employees’ Coordination Committee
- Secretary, Sonali Bank Employees’ Association
- Secretary, All India Standard Bank Grindlays Bank Employees’ Association
- Secretary, All India Standard Chartered Bank Employees’ Federation
- Secretary, General Bank of Netherlands Employees’ Union
- Nityanand Jayaraman, Writer and Social Activist, Chennai
- Ashish Kothari, Pune
- Vijayan MJ, New Delhi
- Samir Mehta, Mumbai
- Ramnarayan, Uttarakhand
- Gen. Sudhir G. Vombatkere, Mysore
- Afsar Jafri, New Delhi
- Jacob John, Bhopal
- Prasad Chacko, Social Worker, Ahmedabad
- Paul Diwakar, New Delhi
- M. K. Sukumaran, Gudalur
- Mukta Srivastava, Mumbai
- Arun Kumar Singh, New Delhi
- Virendra Jain, Kanpur
- Tara Murli, Chennai
- Aruna Rodrigues, Madhya Pradesh
- Rajesh Singh, New Delhi
- Kurien John, Bangalore
- Poguri Chennaiah