Fleece the middle class, caress the corporate defaulter

Few weeks ago SBI was back in the news for all the wrong reasons. A circular that appeared on its website was the reason for all the chaos. In the said circular, SBI had announced that it will charge Rs.25 for every ATM transaction. Due to public outrage, later SBI clarified that the circular was not about savings bank account holders, but only about State Bank Buddy customers, who will be charged Rs. 25 for every ATM transaction.

Though SBI clarified later that the circular was the result of an inadvertent mistake on their part, it is quite difficult to believe it. In all probability it was done only to test the waters to see how customers would react to it. If the reaction was subdued, they would have continued with charging Rs 25 per ATM transaction, but as the reaction was rather fierce, they stepped back from the proposal.

After demonetisation the challenges that banks face are manifold. Even before the disruptive policy of demonetisation added extra pressure on the banks, they were reeling under their non-performing assets (NPAs), which mainly include bad loans of large corporate houses. Credit growth has gone down to 5.4% by 31 March 2017, which is the lowest rate in the past 60 years. This is in contrast to what advocates of note ban had predicted. Their argument was that, with note ban, banks would be flush with money and hence they will offer lower interest rates, which would catapult credit growth to magnificent levels. But that didn’t happen and because of the shock that note ban gave to the economy at large, productive activities slowed, which further reduced demand for credit.

In addition to the debilitating pressure of the NPAs, banks are also faced with the prospect of spending a lot of money as interest payments to its customers. With the note ban, most customers have put all their money in their bank accounts. Banks will have to give interest to all such customers, at a time when there are few takers for bank loans, with which banks would have gained loan interest.

Foreign credit rating agencies as well as international monetary agencies are putting a lot of pressure on the government to act and reduce NPAs of public sector banks, which they claim is affecting investor confidence in the economy of the country. Crony capitalists, who are the main defaulters of bank loans, are adding to the pressure on the government to waive off their loans. A clear pattern can be seen among the comments of the bureaucrats as well, whereby they support reducing the NPAs of the bank by waiving off loans of corporate defaulters. At the same time, they are adamant against waiving off farmers loans in the various states of the country.

In a bid to reduce their working pressure, banks like SBI are increasing all service charges that would affect the ordinary customers badly. Getting back money from corporate defaulters, thereby reducing the NPAs is not easy, particularly when the crony capitalists have great support and backing from the political class. So the only way out for the banks to reduce their financial burden is by fleecing the middle class with exorbitant increase in the service charges. 

RBI has failed to protect the customers from the rapacity of the banks. Also, there hasn’t been any significant protest from any quarters when the banks increase their service charges. The opposition parties have completely failed in organising any mass movements. In the absence of such protests, banks and the central government think that they can get away with anything. The social media has been the only saving grace as far as the objections to the fleecing practices of the banks are concerned. 

It is high time for the middle class to come together and form pressure groups to prevent the banks from making it the scapegoat for saving big corporate defaulters.