Indian banks fleece poor, aid corporates

In a sharply-worded statement, dozens of civil rights organisations and activists have taken strong exception to Indian 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 ₹1,771 crore 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 ₹1,586 crore. The fine was nearly half of the net profit between April and September 2017, which was ₹3,586 crore, 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 demonetisation.”

Calling SBI managing-director Rajnish Kumar's defence in this context “disturbing”, the statement quotes him as saying that SBI was planning to raise ₹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.

“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,” points out activists in the statement.

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Pointing out that the SBI had withdrawn its clause for the penalty for not having minimum balance in May 2012 with the aim of widening its customer base, the statement underlines, "At that time many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 criticised 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 ₹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 written-off over ₹55,000 crore of loans between April and September 2017. 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 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 removal of the penalty due to non-maintenance of minimum balance.

This report first appeared on Counterview