Depositors Are Terrified of Government's Cavalier Approach Towards Banks.

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Dear Finance Minister and RBI Governor,

This petition is addressed to both of you because though you are the two persons who can address our concerns, you are seen, more often than not, to be at loggerheads with each other on important issues that directly concern us.

It must be understood that while the Government has discretion in spending the tax revenue, the same cannot be applied to the hard earned money of depositors in banks, more so in the Public Sector Banks.

It is sheer and plain common sense that risks in the lending and investment portfolios of a bank should be limited to its capital so that, as far as possible, no risk attaches to depositors' money.  This is also the essense of the Basel norms.

The aforesaid is the reason for the public uproar witnessed when the Government tried to push FRDI.  FRDI is essentially an attempt to attach the risks directly to depositors and thus goading the banks to ignore risks thinking that it will be cushioned by our hard earned money.

Attempts by this and the preceding Governments to browbeat the regulator, RBI, into reducing interest rates, market conditions notwithstanding, is essentially meant to erode the value of our deposits by pushing the REAL interest rates into negative.

The recent directive to banks to sanctions loans in less than one hour is nothing less than an effort to make banks dole out our money as charity to whoever asks for it.  Nothing could be more irresponsible than this.  And all this is being done at a time when the government is not able to fully recapitalize the banks, i.e., take up the responsibility for all its directives fraught with risk.

The recent directives for bailing out NBFCs, perhaps an euphemism deliberately used for IL&FS which is in dire straits, may prove to be the proverbial last straw.

Though the Government has done a good job with the Insolvency Act, it has hardly has much impact with the current trend of defaulters decamping from the country with their ill gotten wealth.

Things have come to such a pass that we, the depositors, may be forced into moving our hard earned money either to Private Banks or other less risky financial investments.  And it wasn't in remote past that deposits in PSBs were thought to be the least risky investment.

If the current state of affairs is not corrected it may sound the death knell for the PSBs.


Anil Kumar Upadhyaya

A Concerned Citizen and Retired Banker