Article : A Study On: “Financial Inclusiveness Of RBI And Indian Banks New Avatar”

Title

A Study On: “Financial Inclusiveness Of RBI And Indian Banks New Avatar”

Author

Srikanth R.

   To an activist like me, the greatest loss is the fall in the quality of banking services to the smaller customers, more particularly the elders, disabled, home maker-women, widows and pensioners.
Any right thinking Indian will certainly question the wisdom of the Raghuram Rajan, the newly appointed governor of Reserve Bank of India (RBI) mooting a proposal to allow foreign banks to take over our over century old  domestic banks. The situation is so bad overseas that our veteran bankers can do well to manage over the badly performing foreign banks.
The statement in Washington on unveiling “major banking reforms” that will entail allowing foreign banks to take over domestic banks has rightly raised heckles across the country.  Leading party, the main opposition party, has come out with a strong statement to say that this goes contrary to the Centre’s stand that its “policy of nationalization of banks will not be reversed. Are we importing a financial crisis? The decade-old experience of foreign banks in India is that they only compete with Indian banks in the creamy business segment. Their contribution as far as financial inclusion is concerned is very minimal and below expectations. Even on the concept of new private banks the issue needs to the debate. The All-India Bank Employees Association states that they “strongly oppose proposals aimed at take overs as they are against our country’s interest. At present 80% of the banking sector in India is under the public sector, 15% under private sector and only 5% are foreign banks. The foreign banks have never contributed to India’s economic growth and development – they are only interested in profits… Some of these have been involved in various scams in the past and their licenses ought to have been cancelled. The experience of the US and other countries shows that liberalized banking has led to crises and collapse of banks. In the US alone hundreds of banks have shut down and the US Government had to bale out the bigger banks.” Over the years, our banking has been robust enough to withstand the Great Depression, the Far East crisis, the Mexican crisis, and the 2008 sub-prime meltdown. How much the nationalization of major banks contributed to this is still a matter of debate, not many are willing to concede that the great state bailout of the US, British and Irish banks is indeed Backdoor Nationalization, giving rise to the lesson that governments will not let banks die and tax payer’s monies will be used to rescue them from their greed. Comforted by this, banks all over continue to innovate financially the ways to transform themselves from traditional deposit-taking retail undertaking, solely guided by their responsibility to their main stakeholders, the depositors and as facilitators of credit for trade and industry and underprivileged through inclusive growth, into universal banks. The big banks in the UK and Switzerland are mired i+n major scandals with the US Treasury and regulators imposing massive penalties running into billions and jail terms for violations for offences as bad as cross border money laundering. In the latest money laundering sting operations in India the foreign banks were also caught with their pants down. 

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