The collapse of the Punjab & Maharashtra Co-operative Bank Ltd has created a climate of uncertainty among bank customers. People are now wondering how safe their deposits with banks, including nationalised banks like State Bank of India are. There has been only bad news from the banking sector after business tycoons like Vijay Mallya, Nirav Modi et al fled the country, leaving behind huge debts and non-performing assets (NPAs) with some of the leading banks. That the rich can get away without repaying huge outstandings while the poor are being hounded for defaulting to pay a few thousand rupees has itself created a climate of distrust in the banking system. People believe that banks officials are in collusion with business sharks to loot them of their hard earned deposits. This climate of uncertainty does not bode well for the banks which in any case are now passing through difficult phases and need recapitalisation.
One year before the First World War John Maynard Keynes had pointed to the host of dangers that were threatening India’s financial sector. Keynes felt that India was a dangerous country for lending and borrowing because it lacked robust principles. If one does a search on the Reserve Bank of India website on errant urban co-operative banks, it will be revealed that 24 such local area lenders from different parts of the of the country have either been placed under fresh central bank directions or have received an extension, requiring them to freeze lending and stop further withdrawals. The PMC issue came to light when a whistle blower from the bank wrote to the RBI on September 17 warning about its hidden exposure to the HDIL group. Obviously so much is hidden from the scrutiny of the Board of Governors of the Bank and this is where the danger lies.
Other than the failure of the PMC bank an incident closer home where a muster roll worker of the PWD Patharkhmah ended up committing suicide because he could not withdraw his own salary with a withdrawal slip, has created further jitters. There is no hard and fast rule that withdrawal slips can no longer be used for withdrawal of money if that withdrawal is from the home branch of the customer (home branch is the bank where the customer has his/her account). Of course it is compulsory for the customer to carry their passbook and ID card. It is not incumbent upon every depositor to have a debit card. That a person had to commit suicide because of this lapse on the part of the bank is a heinous offence. Its time Banks learnt to respect their clients.