It's time to streamline functioning of banks

Howsoever capitalized and well regulated may be Indian banking sector, one cannot ignore the colossal non-performing assets (NPAs), snail-paced recoveries, pressing need for efficient dealing with willful defaulters, and a more robust, transparent process to run the show in a sustainable manner! As of now there may not be anything to question the resilience of the Indian banking system, which has stood several downturns as well, there is 'unlimited scope' for corrections, modifications, impact assessment and monitoring!

From time to time, certain sad developments debilitate depositors in general and small ones in particular. When a bank gets into a crisis, depositors receive the shock of their lives, not only that their hard earned money is in trouble but also because of the response they get from the custodians of their savings kept in the bank. Banking for common man including the ease of borrowing, lending and giving loans should be as hassle-free as is for the rich and powerful borrowers among us!

In recent years, a slew of measures have been taken to strengthen the functioning of Indian banks. In terms of credit liquidity and market risk, our banks are strongly positioned. The penetration of Indian banks – public and private sectors – has also significantly improved. The pace of financial inclusion has picked up momentum. Thanks to the ambitious Direct Benefit Transfer scheme and revolutionary Jan Dhan Yojana, the number of account holders has seen a meteoric rise. We have more automated teller machines (ATMs) now, and the counting continues. Almost every small urban habitat has one or two ATM kiosks now. Digital transactions are also gaining ground.

As a long term boost to banking institutions, the Union Cabinet recently approved guarantee of Rs 30,600 crore to back security receipts issued by the National Asset Reconstruction Company Limited (NARCL) for acquiring stressed loan assets. NARCL proposes to acquire stressed assets of about Rs 2 lakh crore in phases within extant regulations of the Reserve Bank of India (RBI). Through NARCL, India's public sector banks (PSBs) wish to aggregate and consolidate stressed assets for their subsequent resolution. PSBs will have 51 per cent ownership in NARCL. Similarly, the India Debt Resolution Company Limited (IDRCL) has been formed with well defined goals.

Finance Minister Nirmala Sitharaman in August this year had a review meeting with chief executive officers (CEOs) of PSBs in Mumbai. The meeting veered around 4Rs strategy of the government – recognition, resolution, recapitalization and reform, which has brought a remarkable metamorphosis in PSBs including Rs 58,697 crore raised as debt and equity, of which Rs 10,543 crore was equity alone in the past five years. The Finance Minister also emphasised the necessity of making co-lending work for enhancing the reach of affordable credit especially to MSMEs and retails.

Finance Minister Sitharaman directed banks to interact with export promotion agencies, industry and commerce bodies so that the 'requirements of exporters can be timely addressed' so that exporters don't have to shuttle between various bankers. Banks should also play a crucial role by hand-holding industries from a particular sector to enable them to become an exporter and thereby play an important role in assisting the one district one product scheme. Between October 2019 and March 2021, banks distributed Rs 4.94 crore as loans through an outreach programme.

The ease of banking, however, does not mean making credit available for the needy in a hassle-free manner but also ensuring customer satisfaction at all levels. Notwithstanding the adoption of digital banking, lending, feature-rich mobile and internet banking, more customer-friendly features and regional language customer-interface, people's branch experience needs to be improved. Private or PSBs, all banks remain quite bullish about selling their products but grievance redressal mechanism, communication channel and transparency are still inadequate. Most of the promises to address grievances are not followed up to customers' satisfaction.

I would like to vouch for the fact that customers are not explained in detail and are not provided with dos and don'ts, terms and conditions, financial loss and benefits while they are convinced to buy a product. Once the product is sold, banks adopt a routine approach in dealing with customers' grievances. The accountability and transparency quotient in dealing with millions of customers is sadly still missing from our banks. Forget the realistic and actionable audit of every individual's performance and utility at all levels.

The common customers suffer a lot for want of gaps in sharing banking knowledge with customers. They need to be told that they can close their personal loans only after a year and what does this mean. They need to be told that paying a minimum payable amount against the outstanding credit card amount is not a relief but a trap one must not walk into. Before selling any product to a customer, she should be provided with a sheet of relevant and useful information in the language she understands the most.

For inclusive and vibrant banking, due diligence matters a lot whether the banker deals with a small depositor or a corporate customer. This diligence needs a lot of value addition at primary, secondary and tertiary level so far as the standard operating procedures of our banks are concerned. Hardly any branch displays info comprehensively with regard to loan facilities available for women, SC, ST and OBC or other entrepreneurs, despite the fact that there many such schemes in force. If bank employees can ask one if she needs a credit card or not, they should also play a role in being a reliable link between people and the government schemes meant for them.

Due diligence, transparency and honesty have a long term role in ensuring sustainability and resilience in our banking system. The problem of willful defaulters can be attributed to several real and concocted factors but the most prominent among them is the lack of resolve and right kind of professional intent. It is true that one doesn't get a loan from any bank once declared a defaulter but she knows multiple other rightful ways to access public funds. The number of accounts with an exposure of over Rs 25 lakh marked by lenders as willful defaulters was pegged at 10,898 as of March 31 this year as per the data released by TransUnion CIBIL and the outstanding from such borrowers at Rs 2.11 lakh crore at the end of 2020-21. The burden of NPAs and willful defaulters must not be seen in isolation but a critical reflection on the entirety of the banks' functioning! From a small customer to a titan, banks must not be discriminatory in any respect!

(The writer is a senior journalist and author. The views expressed are strictly his personal)