Expressing concerns over certain unhealthy practices adopted by banks, YV Reddy, governor of the Reserve Bank of India (RBI), said several adverse features in regard to retail customers were noticed, particularly in a few domestic banks.
Apart from issues of appropriate pricing, instances of unequal contracts, unfair trade practices, non-transparent fees, intrusion into privacy, excessive penalties, delays in cheque-clearing, arbitrary revision of interest rates or equated monthly installments, usurious interest charges in some cases and excesses by loan recovery agents are noticed warranting several institutional, policy and procedural interventions by RBI, he said while addressing the Annual International Seminar in Bali on on November 8.
?A delicate balance between competing considerations is needed but to the extent banks have special privileges, the regulator who has granted such privileges has a responsibility to ensure financial deepening and widening in an efficient, fair and equitable manner,? he averred.
Also, another area of concern has been the concentration of bank branches in metropolitan areas to the detriment of semi urban and rural areas, he said.
Further, according to Reddy the accelerated growth in the Indian economy has benefited several States, but there are a few where credit deposit ratios of the banking system are observed to be low.
?It has become necessary to identify unique problems for each State for expanding banking facilities to such lagging States and formulate area specific action plans for accelerated financial deepening,?? he said.
Such plans have already been drawn up for Uttaranchal, North Eastern States, Himachal, Jharkhand, Andaman & Nicobar and Bihar. There is enthusiasm among banks in view of expanding business opportunities and significant support from state governments which see a synergy.
A special programme for the revival of rural cooperatives has been launched with close involvement of RBI, NABARD, government of India and state governments with a possible fiscal support to the tune of about 0.50% of GDP. These reforms are considered essential to cater to the gaps in services by scheduled commercial banks, not only in banking but in other related services including forex for current account, insurance products, etc, said Reddy.
Reddy explained that the policy preferences of RBI in the banking sector, which are aimed to address issues of targeted allocation of credit and penetration of banking services have not adversely affected the improvements in accounting practices, reduction in non-performing assets and improvements in profitability as well as capital adequacy.
