Indian Bank profit down by 50%, Public is losing trust in banking system

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The Bharatiya Janata Party-led National Democratic Alliance government has made all attempts to increase the account holders in banks across the nation, but one of the Public sector lender Indian Bank on January 25, 2019 announced about a 50 per cent fall in its standalone net profit for the third quarter ended on December 31 in the back drop of an increased provision for bad loans, said a top bank official- Managing Director and CEO, Padmaja Chunduru.

According to Chunduru, for the period under review, Indian Bank posted a net profit of Rs 152.26 crore down from Rs 303.06 crore posted for the quarter ended December 31, 2017. He clarifies saying that the net profit was impacted during the third quarter of the current fiscal due to higher non-performing assets (NPA), mainly due to the bank’s exposure to Infrastructure Leasing & Financial Services Limited (IL&FS).

Just two days back, Modi, during the eighth interaction with beneficiaries of various social security schemes from across the country through video bridge, informed that the 28 crore bank accounts opened under Pradhan Mantri Jan Dhan Yojana  during the period 2014 – 2017 is nearly 55% of the total bank accounts opened in the world. He also expressed happiness that more women have bank accounts in India now and that number of bank accounts in India has reached 80% from 53% in 2014.

Reacting to all the claims, Congress leader, RPN Singh who is the Spokesperson of the party stated that people are losing trust in the banking system and the Indian Rupee has become the worst-performing currency in the world under the Narendra Modi-led NDA government. On behalf of the party, he demanded that Modi answers all questions from all stages and forums.

Singh while attacking the Modi government pointed out that BJP claims that it would raise the value of the Indian rupee to Rs 40 per dollar before coming to power has failed on this as now, it is about to cross Rs 70 which is the worst in the past 70 years.

The Congress spokesperson said that Modi had promised to deposit Rs 15 lakh in the bank accounts of poor by bringing back the black money worth USD 800,000 million from foreign countries, but now the data shows that this year the deposit in the Swiss Bank has gone up by 50 per cent. It is the second highest in our history; the highest was in 2004 when the BJP was in power last time. He alleged that the rise in deposit is after the demonetization.

Making the most of this opportunity, Singh said that some Indians, including Nirav Modi and Vijay Mallya, took away the money of the poor. He also said that the Non Performing Assets under the NDA rule in the past four years has crossed Rs 10,00,000 crore, which can cross Rs 15,00,000 crore in next two years while adding that people are losing trust in banks under BJP rule.

Now comes the problem where the banking policy is changed after demonetization, where even the student accounts are required to maintain a minimum deposit – the zero balance for the students and the salary accounts were removed- posing difficulties for this section of account holders. The Reserve Bank of India (RBI) meanwhile pointed out that the central bank’s latest policy statement indicated a softening of its stance and opens up the possibility of a rate cut in the near future. The bank had earned hefty income of Rs 1,771 crore in just eight months from depositors who failed to maintain balance in their bank accounts. The amount was more than SBI’s July-September quarter net profit of Rs 1,581.55 crore and nearly half of the Rs 3,586 crore it earned as net profit in April-September.

At its second bi-monthly monetary policy review of the fiscal held in Mumbai on June 7, 2017, the RBI maintained status quo on its repo, or short-term rate for lending to Commercial Banks, at 6.25 per cent for the fourth successive policy review, dashing the government’s hopes of a reduction. In doing so, the policy statement said the MPC was guided by the risks to inflation.

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.

Lately, all government payments too are being transferred via bank accounts. More than for security, this 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.

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 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 out of 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 somewhat streamlined the services. However, matters are still not satisfactory. The Meghalaya government has  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.

The Meghalaya Government, if required, should 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.

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 hilly 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.