India requires strong measures in financial sector. The PMC Bank episode proves that Indian Banking system requires strong reforms particularly in protection of depositors rights. NDA Government made an attempt through introduction of FDRI Bill. Unfortunately, it went into lot of controversies because of one clause against the interest of depositors. Instead of removing that clause, a systematic campaign was conducted against the very Bill itself. The Bill contains some effective regulatory aspects which are in dire need now as share of private sector increasing year by year.
Reintroduction of FRDI Bill with modified version duly removing liability clause impacting depositors is the need of hour. The insurance cover of Rs 1 lakh only to the depositors was introduced long back and the same is to be enhanced substantially. Though Banks may not bear 100% insurance cover instantly, it should be planned in such a manner that in a span of 5-10 years, all individual deposits must be covered insurance without any ceiling. The withdrawn FRDI Bill has enabling provision to enhance the existing limit of Rs 1 lakh cover at regular intervals.
The PMC Bank lent 73% of its lending limit to single borrower, that is , HDIL. What supervision by RBI done to control it? Though it is under dual inspection, RBI can not take shelter under that clause when they have mechanism of inspection every year. Any layman can say that providing lending to single borrower upto nearly 75% is against banking norms. How RBI could not detect it till now?
We are least bothered about depositors. It is the depositors money which is being lent by Banks to the market. The impression in India carries otherwise. The social banking, priority banking, concessional banking, political banking are being worked out at the cost of depositors money. Government all these years carried its own obligations to the society through Bank funds which are really belonging to poor and middle class people of this country. Banks are directed in lending by Government as if resources belong to them. All these days, an impression was created that Public Sector character of Banks was maintained due to pressure from unions and public but reality is otherwise. These pressures were being exploited by Government to make it their pocket borrow to its advantage. It is high time that depositors whether they belong to Public Sector or Private Sector to come out openly and demand the Government to allow the Banks to run professionally. It is the only way out. As a first step, let the insurance cover of individual deposits should be increased to RS 10 lakhs from the existing Rs 1 lakh. It should be gradually enhanced upwards. Let there be campaign for this issue by depositors.