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State government should encourage transaction via Cooperative Banks to ease Nationalized Banks

Written by Meghalaya Times. Posted in Editorial

Thomas Lim
The recent thrashing of Bank Employee in the village of Chibinang, under the Phulbari Police Station, by unidentified miscreants outside the bank, is suspected to be retribution of aggrieved customers who are not satisfied with the services of State Bank of India, Chibinang branch. The conclusion was arrived- according to a source from the branch, as such incident is not an isolated one and there have been similar incidents in the past as well and a lax administration has led to the employees feeling very insecure in the branch and outside it.
The other bank employees stated that they are under daily threat due to the branch being overcrowded. Sometimes when the customer feels unhappy with the working of the branch they threaten the staff. The incident of July 5, 2018, at about 2:50 pm, when the employee in question went out of the branch for lunch, three miscreants, who waited outside for him to come out, suddenly assaulted the bank employee identified as Sylvester Marak from Boko in Assam and is currently undergoing treatment in Phulbari CHC.


As mentioned this is not an isolated case, earlier the former Branch Manager was beaten up by goons in the main Chibinang Market and nothing happened. Yet another similar incident occurred when some people tried to play with the gun of the security guard to which he objected. His objection led to the entire branch being surrounded by people wanting to beat them all up.
Such incident only exposed the poor customers services of SBI not only the Chibinang branch, but in most of the branches of this bank. The reason of such services, according to most customers, because the state government only banks with them, hence they do not invest much to improve the services.
The banking institution after the demonetization has exposed the poor banking system in Meghalaya, with its existing Core Banking Solutions (CBS), designed for ‘class banking’ and not for ‘mass banking’. But post-demonetization more rural people are going to come into the banking net. They will also start transacting through other modes like PoS, ATMs, mobile phones and others. The Government’s move for a subtle shift from “curbing black money” to the need for a “cashless economy” has forced the experts to comment that a cashless economy could hit the bottom lines of banks as the number of transactions would increase exponentially, making them cost-inefficient.
According to the expert, the CBS has to be geared up for small-value and large-volume transactions. The rule that a higher volume reduces cost per account does not apply here (because the cost is constant). Once more rural customers come into the picture; the Know Your Customer (KYC) norms would have also to be spruced up. At present, the KYC norms have been simplified and not all fields are filled up, also, the anywhere-banking facility may not be used by rural customers.
Managing Director, Patterns Software Design Institute Pvt Ltd, B. Suresh Kamath informed that the central government is propagating micro-ATMs, PoS and other digital mode transactions and hence banks may find the maintenance costs of accounts uneconomical in rural areas.
According to Kamath, the way out is to bifurcate the existing software architecture into two — one for class (urban) and the other for mass (rural) banking at the front end.
He also informed that the current CBS needs higher investments in computer hardware. On the other hand, for the kind of transactions that would be done in rural areas the systems can be lighter and need no heavy investments. The common CBS are yet to look into the bifurcation of the system based on cost-efficiency.
In the case of Meghalaya where many still prefer to save their money in piggy banks made of bamboo or tins and many still hide their cash and other valuables at various secured corners in their respective houses, all have now been compelled to open bank accounts.
It all started after a daring robbery of the cash vehicle from Upper Shillong during the financial year ending transaction way back in the late 1990s. Since then all government employees are asked to open the salary account in the nationalised banks. Lately all government payments too are being transferred via bank accounts. More than for security factors is an attempt to move towards India being a nation where cashless transactions are the norm rather than the exception. However, all transactions via banks still lack detailing to verify the source of payment.
Here in Meghalaya where the Credit - Debit ratio is in bad shape, the banking institutions have blamed this on Special Land Protection Act, where it is difficult to mortgage landed property against loans. Another hindrance is the lack of industrial technical knowhow which has been the main stumbling block for small loans.
With regard to education loans, students have to move from pillar to post even for the small loans below four lakhs of rupees. It is often seen that the applicants are forced to deposit mortgage which is against instructions. Many of the students have to give up their dreams for higher studies because of the attitude of the banking institutions.
In Meghalaya, the easiest loan for any of the government employees is the car loan. From time to time Car Melas are organized to attract customers even as concern about traffic congestion is thrown to the wind in the interest of business. There are various complaints about the poor customer services, especially of the nationalized banks even though the recent entry of others banks has somehow streamlined the services. However, matters are still not satisfactory. The Meghalaya government had given a free hand to banking institutions. Also all government transactions are being done through such banks; hence the attitude of the bankers is often one of contempt for the general public. Even the free entry of other banks in the state did not benefit its citizens.
Meghalaya government is not at all concerned about the plight of the students, small entrepreneurs and enterprises who apply for loans. Even Meghalaya deserves people-friendly banking schemes.
The Government, if required should also encourage banking of government transaction via cooperative banks of the state which will not only release the pressure on the nationalized banks, but will also improve services. Meghalaya too needs to scout for new generation banks which can provide more people-friendly schemes and educational loans.
The Credit - Deposit ratio in the state too needs to be beefed up which will in turn be a fillip to the economic growth of the state. Insecurity about banking services in the state will then be extended to the grassroots who will benefit in an environment where there is no need for the enactment of a Bill to recover bad loans.
RBI needs to take special attention on the lending formalities in this Hills State, where many banks refuse to sanction loans where landed property is taken as mortgage in areas where the Special Land protection Act is enforced. Also, more than car loans, the banking institutions here should extend their services to support the now defunct Meghalaya Industrial Development Corporation, to formulate more entrepreneurship ventures, which are both environmental friendly and where employment avenues are high. Otherwise, all the brainstorming in any of the bi-monthly monetary policy review will not benefit Meghalaya, where the public have already restored to assaulting of employees.


 

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