https://www.youtube.com/watch?v=gDRVxlMjebI Jun 12, 2025 Nope w/ Kunal Kamra Former General Secretary of All India Bank Officers Confederation and currently coordinates the Peoples Commission on Public Sector and Public services. so today the corporates are getting such cheap credit The RBI data now shows that 449 people in this country corporates who have a loans above 100 cr they are given loan at 4% rate of interest
Yotube transcript : so today the corporates are getting such cheap credit The RBI data now shows that
449 people in this country corporates who have a loans above 100 cr they are
given loan at 4% rate of interest It is the policy of the reserve bank of India
and the government of India Nowhere you find any advertisement that you come and take loan at 4% One example is the
poorest man in this country Tatas They walked over Air India The bank gave a
loan of 10,000 crores at 4% better biggest problem I see is that you are
taking money from the small depositors at a very cheap rate of interest and
giving it at a higher rate of interest to a small borrower for an education loan borrower for an MSM borrower for a
farmer you are giving it 11% 12% whereas you are giving it cheap to corporate
borrowers internet
Nope Not your ordinary podcast for entertainment Nope Nope Nope Nope N So
sir you've spent around four decades in banking I want to start with a question
on the public sector banks We hear about them either in jokes or with bad news
Why is that the public sector banks their goals have been changed after 1991
with the introduction of the LPG liberalization privatization globalization policy Three major issues
The main is the stock shortage Business is growing up so fast but staff are not
increased In between 10 years there was a ban on recruitment After that we had
to go on a agitation demanding recruitment Now just to quote one small
statistics the biggest bank state bank of India where I worked per employee
customers is 2,119 So average one employee scattering to
2,119 whereas in case of the HDFC bank a
private sector bank which is a competitor to SBA it is just 359 So SBI
staff is catering to almost six times the number of customers than the private
sector bank So naturally the people will be unhappy service will be poor Secondly
nationalization After 1997 1947 the banks were in the private sector Enir
banking system 1955 Imperial Bank of India was nationalized
to bring State Bank of India There were two major studies One is by the Malones
Committee Another is by RK Hazari Both showed that there was absolutely no
credit being given to the farmers or small industries Only 9% of the credit
was going to the industries and farmers The rest was only going to the industry
friends between the industry and rural areas there was absolutely no bank branches That is how Mr Sindra Gandhi on
19th July 1969 brought nationalis The objective of nationalization was not to
make profit It was to give service to the common man to reach banking services
across the country especially to the rural and semi-aran areas to improve the credit deposit ratio especially in the
so-called Bimaru states we are Madhya Pradesh Uttar Pradesh where there was
hardly any credit given to improve the number of branches and bring certain
professionalism So initially 14 banks were nationalized in 1969 and uh another
six in 1980 After that the entire scenario changed If you just compare
1970 and 1991 the rural branches in 1991
became 58% of the branches Credit deposit ratio increased a lot Common man
was able to get credit In 1971 itself 95% of the loans were given to
small borrowers less than 10,000 rupees 1991 it was 95%
again but then orientation changed with the
recommendations of one committee after the IM of world bank loan that was a
committee called Narasim committee which recommended that banking is a business
it should be for profit why you give priority sector lending you give small loans at such cheap rates it should be
for profit of it So reorient the banking Slowly things started changing One
important statistics between 19 41 and 19 91
after the nationalization especially the income gap went down The rich 1% who
were holding 21% of the wealth in the country it came down to 6% And the
bottom 51% went up But subsequently after 1991 if now we are seeing that 1%
of the population is keeping the more than 50% of the wealth of the country
Here the banks have played a very important role 74% of the GDP of the
country is from bank deposits Almost the same in the case of bank credit So India
is a bank-based economy The orientation changed and we started giving more loans
to corporates big industries infrastructure Especially after 1991 the institutions
like the Development Financial Institution Industrial Development Bank of India Industrial Credit and
Investment Corporation of India UTA they were converted into regular banks They
were actually catering to long-term credit So the longterm credit was forced
on the public sector banks who did not really have that expertise at that point
of time So naturally the non-performing assets also increased
People are unhappy that public sector banks are not supporting them It is
mainly because of the policies of the government especially in the last 10 years After this government came to
power in 2014 In January 2016 15 itself they had a
meeting called Gan Sankam at Pune where all the public sector bank managing
directors were invited Prime Minister attended finance minister attended and
they were told what is to be done by the private sector banks leaders from the MDS of the private
sector banks The private sector banks were not present there in the meeting No
it was just the public sector banks Only the public sector banks They were put what is to be done So they slowly
started changing See after nationalization there was a lead bank scheme under which
every district was allotted to a public sector bank They had to prepare a five-year credit plan annual credit plan
1982 National Bank for agriculture and rural development an award came they
were asked to prepare a potential linked credit plan for agriculture and rural credit that was again made into annual
credit plan So there was an approach to develop a district as a whole Then
service area approach was given Each bank branch was allotted certain villages that where they have to look
after the development This all got changed The priority sector lending
especially 40% of the credit was to go to the weaker the uh farmers small
industries village industries like that But this government diluted one by one A
bank can give 100 cr loan for a food processing or even a water processing
plant and that is considered as a priority sector A small industry with
250 crores turnover that is also considered as a priority priority sector
So naturally what happens the small credit goes down and you correlate it
with the staff I had been branch manager in three branches When I was in Nagaland
we used to go to villages request people to come and open account They will bring
cash in a bamboo box bamboo filled with currency they don't even know to count
they will just put it you count and take it open an account today a branch where I work in Nagalan called sansanu that
has been closed down saying that it is not profit making branch profit was not the motive that time because of this
change in the policy things have changed and as I told you three branches when I
was branch manager the first time I had four field offices So I used to send the
field offices to the entire market find out who are all having account here who
are all getting loans from here otherwise who from where they are getting So there was a big vegetable
market morning women will come with just an empty box palm leaves box there will
be a mahajan standing there they will take four 500 rupees loan from him he
will give only 450 rupees but it will be treated as 500
they will buy some vegetable from bulk sellers they will sit down and keep selling evening they will pay back 500
rupees see the rate of interest 10% a day yes
so then what we did is to all of them I told the field offices he give them
5,000 rupees credit let them get out of this money lenders it made a tremendous
change all shopkeepers around we could give loans farmers we could but then
after 2 years the field offices were reduced to two then it was reduced to
one So when I was given a target that you have to achieve 100 cr loan target
instead of giving to 1,000 people I give to 100 people 1 cr each reach my target
is filled So this is how the banking changed So today the corporates are getting such cheap credit very
unfortunate The RBI data now shows that 449 people in this country corporates
who have a loans above 100 crores they are given loan at 4% rate of interest
annually annually and that is not decided by the bank alone It is the
policy of the Reserve Bank of India and the government of India Nowhere you find any advertisement that you come and take
four loan at 4% There was a policy which still exists but not implemented After
nationalization under priority sector the banks were told out of the total
credit 1% of the total credit should go to the weakest section of the society at
4% simple interest No Vangu corporates are getting 4% credit One example is the
poorest man in this country tas they walked over air India the bank gave a
loan of 10,000 crores at 4% so corporates are being supported today
as I told you earlier 95% of the small credit was going to the common man now
the small credit has come down to almost 30% corporate credit is going up and it
is these corporates who are not repaying the loans also So what happens if a small credit person does not repay the
loan and what happens when a corporate does not repay the loan a small creditor
borrower who has taken 50,000 he is not repaying banks and notice we go and
stand at his door in the morning He feels ashamed He borrows somewhere and
comes and repay And there are cases where due to recovery pressure there
have been former suicides Have you seen any rich man who has taken loan of
crores committing suicide they don't anilmani had an outstanding of 46,000 crores for
one of his company This government only brought one new procedure under the
insolvency and bankruptcy code National company law tribunals were formed So you
transfer your loan to the NCT There is a dispute mechanism
There is a retired judge sitting ahead There is a broker in between who is a
retired banker or a chartered accountant They negotiate The loans are settled and
it is called a haircut You have 100 crores to pay You pay 1 cr The rest is
99 is haircut Now in this case of panilani he pays just 453 crores out of
46,000 crores Not even 2% of the outstanding and the loan is settled Who took over
the loan his own elder brother MK one the poorest one Similarly Vdanda Agarwa
the famous Starlite Agarwa he takes over 19 companies under video with a haircut
of 95% The outstanding was 72,000 crores So only 5% he pays and he would take
over This is the kind of settlements taking place in the case of corporate borrowance But for a small borrower one
his rate of interest is high Secondly if he does not pay the bank puts pressure
and they started a new formula You sell your loans to the asset reconstruction
company It happened in Maduray in Tamil Nadu Educational loan
for a physically challenged boy was given at 11% rate of interest He could
not repay because he did not get a job immediately The bank sold the loan to
Reliance Asset Reconstruction Company Reliance is one of the biggest borrowers
The Reliance pays only 15% of the loan outstanding to the bank Then they sent
their goons to recover Those fellows went and ill treated this young boy and
he committed suicide So in case of a small borrower actually if small
borrowers they default also 100 borrowers default also the amount will be small The amount given is small
Whereas one corporate borrower defaults it affects the balance sheet of the bank itself Now what is happening is that you
give loan they don't repay you call it a non-performing asset you have a
compromise proposal either to an asset reconstruction company or direct
compromise or both to the NCT return off it's only the loss for the
bank It's a good win-win situation for the purchases as well as the seller the
borrowers So from what I understand is that if someone does not repay the loan the bank can sell that loan at whatever
percent they think is correct and this person who they sell it to they have the
right to recover the loan amount and the interest also Yes They keep festering
till the amount is paid The parents are troubled Then you again
have this civil Once you default your score for borrowing goes down You can
never get another loan from any other bank This government claims that we have given 51 cr people mudra loans
50,000 five lakh maximum is 10 lakhs Now they
have increased it to 20 lakhs These 51 cr people one the statistic is bogus as
per the population census the last census the number of households in this
country are 18 crores See now it has gone up probably to 25 20 25 cr out of
that if 51 cr people have taken loans So every house there would have been two
loans and everywhere you walk around you will find small enterprises flourishing
Do we see that we don't Those people quite a number of youngsters might have
got that loan and they don't repay because the ruling party people go and
tell them
you don't have to repay So the repayment is not coming Banks have a escape route
There is a credit guarantee scheme Under that scheme they can get at least a
portion of the outstanding normally up to 75% they get the rest is written off
but this poor borrower who thought he has made some money his name is included
in this civil he can never get another loan even when their children go for
loan this civil score will deflect oh your father has an outstanding these
people don't realize so Today the biggest problem I see is that you
are taking money from the small depositors at a very cheap rate of
interest and giving it at a higher rate of interest to a small borrower for an
education loan borrower for an MSME borrower for a farmer you are giving at
11% 12% whereas you are giving it at cheap to corporate borrowers for marriage loan for construction of
property anything Yes housing loan at least as it is secured by the building
itself that is given at a cheaper rate of interest The important factor which
is not being talked about anywhere is from where does this bank give loan do
they have so much of capital to give they don't HDFC's capital is some 750
crores only but their deposit is 21 lakh crores It is the common man who is
depositing money The RBA data shows that 80% of these deposits are small deposits
called household deposits At one point of time we were paying on the savings
bank account itself 5% rate of interest Now it has come down to 2.5 2% On fixed
deposit we were giving loan interest up to 18% Today it has come down to 6.5
6.75 Without this deposit bank has no money to lend So you are taking it at
such a cheap rate from the small depositors and giving it at a cheap rate
to a corporate borrower And there again even the same depositor he wants a
housing loan educational loan or MSME loan He is has to pay 11% 12% rate of
interest That is the tragedy And if all the depositors decide that no we don't
want this money to be kept with your bank because you are not paying good interest the system will immediately
collapse This banks are not realizing RBA is not realizing slowly things are
changing The last 50 years last year we have had the lowest
savings growth for that it will go down People are now looking for other alternatives There are local seat fund
followers who operate higher rate of interest There are ny companies There
are mutual funds where you can usually invest where you get little higher
interest So slowly the growth in savings deposits and fixed deposit is going down
That will affect the banking system as a whole Unless the reserve bank and
government of India realize this danger that we are heading towards a crisis
According to you what should the policy be uh what sort of a policy is needed
for the country to not head towards a crisis for the uh small borrower and the
small depositor for them to have a banking system or have some sort of you
know shity that they can proceed in a direction with growth See number one I would like
that it should start with the opening of more branches access access now in India
we have one branch for 11,000 population average in the developed countries even
developing countries it is 3,000 to 5,000 So you have a huge scope for
expanding the number of branches and provide access to credit Now the rural
branches have come down to 28% of the total branch So rural areas people are
not having access to credit and they are forced to go to the business correspondents They don't have a regular
job They don't come under any reservation policy They just get
incentive for the turnover and they are working under the corporate correspondent including reliance and
they get some portion of the commission paid to them There are 19.5 lakhs of
them in this country I would suggest that all this we the what they now call
it a customer service point convert it into bank branches then they can real
access will be there they can open any account they can transact they can borrow they will be a field officer put
so that loan also can be given now which they cannot get 10 lakhs is the number of employees regular employees 19.5
lakhs is the business correspondent so branch network has to increase Number two the staff strength has to
drastically increase As I told you public sector banks how they are under staff In public sector banks alone
provides reservation Private sector bank there are 10 lakh employees Public sector bank there are say 10 lakhs seven
lakhs employees Private sector does not give the reservation policy at all They
don't follow if the number of branches and staff are increased Naturally the
deposits will also start increasing provide some attractive interest When we
were paying 5% rate of interest for the savings bank deposit and fixed deposit
even 18% that time also banks were making profit they were not running at a loss So you provide that 5% On fixed
deposit you provide at least 10% interest 35% of the fixed deposits are
put by senior citizens they require some income so that they can reand
once you do that the savings rate again goes up then you get adequate funds for
lending more and with the increase in number of branches the small credit will
increase once again bring back the same priority sectors lending norms give 1%
of loans to the weaker section of the society at 4% rate of interest to the
farmers you give concessional rate of interest not to the corporates for the MSMES who are the ones who are creating
large employment give at a cheaper rate of interest you charge high on the
credit card people don't bother they will pay 36% also today because banks
are not giving these loans to these small borrowers MSMES farmers where are
they going they are going to the loan stocks as you mentioned who are called
the non-banking financial companies micro finance institutions for whom
there is no interest ceiling Mr Bank of India 2 years back removed the interest
ceiling on loans They are taking loan from the public sector bank at 10% 11%
And they are giving at 24% 30% There is a study which shows that even at 100%
interest rate loans are given and there is a coive method of recovery Many
states now have started bringing in new laws that uh no coercive recovery should
be there but still that is continuing Only four states have brought that law but it is still continuing So the olden
day money lenders who were replaced by nationalized bank they have come back once again in the name of non-banking
financial companies Another aspect which again is not talked about is that when
privatization was proposed by the narasimum committee itself the bank
unions other trade unions public were against it So they did not privatize any
public sector Instead of that they used a very dubious method
HDFC which was a housing development and finance corporation only to give loans
for housing to promote housing in the country to everybody have access to a
house that was converted into a universal bank called HDFC bank Today
55% of the shareholding of SDFC bank is held by foreigners So without knowing
the profit is going to the foreigners and you cannot call it anymore an Indian bank Secondly the ICICI industrial
credit and investment corporation of India they were converted into a bank Now there also 55% of the shareholding
is held by the foreigners IDBI which was doing a human service for the industrial
development that was converted into an IDBI bank it went into a crisis l was
asked to support that so LIC bought over 51% of the shares somebody from LA went
as managing director of IDB IDBI bank they nurtured it in two years they
brought good profit and now they are making a profit last year it was more than 7,200 cr profit Now the government
is saying that no no no that's enough now you sell it to somebody else
and there is only one bidder fairfax from Canada which has a dubious history
in our country itself they are going to be the single purchaser so one question
I have sir is when you say a bank has to do well we've established the fact that
nationalization of banks was not done for profit but they were making profit
So what is the sort of profit they were making which was not enough even those
days there was at least 10 to 15% profit The government which has a shareholding
in the public sector banks they also want a higher return So they keep on
pushing for higher profit like a state bank of India it has made a profit of
almost 1 lakh crores 97,000 crores so almost 1 lakh cr instead of
making so much of profit even 10,000 crores would have been sufficient for a
big bank and the rest of the money could be invested in increasing the number of
branches and increasing the number of staff and the outreach will increase so
performance should not be judged only on profit What is their rural credit what
is their small credit what is their credit for farmers what is their credit for housing what is their credit for
education loan borrowers but the current government claims that they have made
sure that more people open bank accounts and are entering the banking sector via
schemes that they are launching So their claim of the jandan accounts global
record that highest number of accounts opened in a short period Again one
important factor is that 97% of the jandan accounts were opened by
public sector banks only 3% by the private sector bank Now initially we
told that you don't have to have a minimum balance even with zero you can open an account Subsequently
the banks said that no no no for some time it's all right now you'll have to
have some minimum balance See the loss which is made on the corporate credit by
return off that to some extent is compensated by service charges Banks
started charging minimum balance charges In 2023 alone 21,000 crores were
collected as minimum balance charge Then ATM we gave free ATM card Now you have
more than five transaction for that you have to pay 23 rupees per transaction plus 18% GST Then you get an SMS for
that you get a have to chart There is inspection charge There is cash handling charge There is transaction chart
checkbook chart Like that so much of charges are leved on the people Banks
when they are making profit that profit should be reinvested That is the purpose of a public sector bank So if they
reinvest by opening more branches and more stuff the outreach will increase
See the difference between a corporate credit big weak credit and a small credit is a small borrower he gets one
lakh loan he will immediately invest it in something So there is a rotation of
money A big borrower who takes he will not be immediately investing it So there
is no multiplier effect in the economy which is possible in a smaller credit
especially to farmers and MSMAs So the total orientation of the banking sector
should change Now you are trying to cater to a minuscule minority by giving
large corporate loans Instead of that the focus should shift to the majority in the country the common man The income
inequality is increasing The banks can bring down the income inequality by
providing adequate credit And the adequate credit means that the award is
there should be is there They are bringing out formulas on how to give a
adequate loan Say for example those days when I was a field officer when we were
giving a loan for purchase of cow We were told that you should give minimum
two cows The first cow you give which is a milk multi animal with a c Second one
you give after 6 months so that there is continuous yield of milk throughout the year and we had a scheme called
integrated rural development program which catered to large number of people
in the rural semi-urban areas I would suggest that there should be a similar program now integrated rural development
program integrated urban development program in which banks will go to the
common man and tell them that okay what is your credit need we will give you the loan you develop your business What
China does China is telling the public sector banks that you give credit let
them start enterprises if they fail See there are uh studies which show that
small new kind of innovative experiments in enterprises many of them
fail here in India if they fail we go after the borrower and trouble them
China it says that we will take care of that you write up your amount will be
given by the government of India not only there I have seen it in Israel it's a capitalist country for a startup that
is called a startup of nation the horrible nation But in on other terms
but for the startups the government gives free fund and once they do well
the banks go and tell them you expand we'll give you loan So that kind of thing is not there in this country
Unless we do that you are not providing employment The employment growth has
gone down very drastically They promised of 1 cr 2 cr employment and all nothing
happened Next budget they didn't even talk about it They talk about self-employment Self-employment if
self-employment has to grow then you have to create this support system You
can write off the small loans even in large numbers that will not affect the
banking system This this government should be preferred to do that But now
this government's policy has become by the corporate for the corporate of the
corporate So only few people are being given everything Hadani Amani they are
resto bank of India in 2016 after this large NPS 12 accounts were transferred
to NCT and that time Ram Rajan was there he was also a proc corporate man but
there was a policy announced was issued that more than 10,000 cr banks would not
give to one particular corporate all banks together Hence the consortium also
one corporate can be given only maximum 10,000 crores till date it is not
implement loan outstanding must be more than one lakh crores in the banking system there
is no limit and they are getting cheaper credit if you are going to create more
and more few number of big corporates as Kant the former chief executive officer
of NITIO which I call Anity said that we will create few global champions they
will take care of the country That is exactly this government is following and
that is what is being implemented by the banking system Now all the policies are
dictated to the banking system and they are not allowed to function
independently One more important thing is that after nationalization
every public sector bank had two representatives from the trade union
They were considered as watchd dogs One from the officers category one from the
workman category They were in the boards as board of directors So they had access
to everything Whose loan is being written off who is given more credit
what policies are being implemented they were able to monitor 2014
stopped After that no officer director or employee director has been appointed
2017 All India Bank Officers Confederation filed the case I was
general secretary there The case is still going on in Delhi High Court Every
time the government lawyer comes with some excuse and now 17 recommendations
are with the appointments committee of the cabinet there are only two people prime minister and the home minister
they don't have time to look at it spending for months together and the
lawyers come and say that please give us another 3 months time another 3 months time nothing has happened so the system
the boards have become totally opaque You can write off any number of loans
huge amounts nobody comes to know So that watchdog role is gone That is also
affected the public sector banks very badly This has to be brought back
There's also the sort of farming uh crisis with banks like every time there
is uh farmers not being able to pay their loan bank and the general public
seems to be outraged on why are we doing this loan waiverss for farmers So if we
can just put things in perspective of the kind of loans that G banks wave off
of corporates versus what would be the farming loan that they would be waving off comparatively total outstanding
credit for palm sector is 18% Now as I
told norms have been changed One is mango farm thousands of acres that is
also considered as an agriculture loan The fatty field
gets just one lakh loan that is also agriculture loan Earlier there was a
norm that at least 14% of these loans should go for direct credit actual
agriculture The rest can be indirect indirect like food processing and other
but that this government removed that So even if you are doing something called
agriculture which is not really agriculture that is also under this 18
So if we really look at small loans let's say less than two lakhs that will
be hardly five to 6% of the total credit in
the banking system So even if you write off that nothing happens there was a write off done by the UPA government
once it did not affect the banking system Of course the government
reimburse the amount uh government can because if farm credit goes up the
employment even now 55% of the working
population is depend on agriculture and allied activities So you are creating an
employment you are uplifting the lifestyle of the people you are uplifting people from the poverty for
that if you write off a little bit what is happen nothing will the last 10 years
as per their own report given to the parliament it itself 16.5 lakh crores
have been written off and out of that 83% is to the corporates so if you write
off the small loans alone less than two lakhs it's not going to affect the
banking system at all So the demand for writing of farmer's loan for one is good
it should be implemented So practically today what is happening is that the farmer is not getting a new credit but
agriculture credit is going up Every budget the finance minister gives a target the kiss credit card limit that
should be increased So the so if she says that okay this year 11% increase
what banks are doing if somebody has already taken loan of one lakh give
another 10,000 in his account by increasing the limit he has to pay that
10% interest so already the outstanding is 1 lakh 10,000 only limit is changed
he is not getting single rupee in his head only in the books of account the
loan is going up So once you write off and then you start giving fresh credit
then only actual impact will be visible Another thing I wanted to ask you is that uh there is a lot of uh people who
cannot get loans to start like the smallest business or buy a bike or have
some way of transporting themselves from A to B because currently if you even get a small job you'll still need transport
and that facility of internal transport is not built in India So what is it that
the government can do or the banking sector can do to create more uh vehicle
ownership before this liberalization two wheeler loan four-wheeler loan was very
common in the public sector Now the amount is less
So as I told you instead of giving 1,000 people 10 lakh loan you give 1 cr it
becomes easy due to shortage of stuff So practically the vehicle loans especially
two-wheer loans in the banking system has disappeared You ask anybody they
will say I took got it from Vaj finance SRM finance Solomandal Finance Mut
Finance and these are all non-banking financial companies They get loan from the public sector banks and they are
charging higher rate of interest and giving this two wheeler In fact there are studies which are saying that
high-end cars are being purchased more and uh two wheeler purchase has gone
down You want it then you have to go higher rate of interest and go to this
non-banking financial I'll just tell you one practical example After this why not
disaster I was there for a study and I said that instead of asking for
moratorium on loan you ask for waiver of the loan because you have lost your
assets So there then they did a study there were 95
people affected who are warning who are warning this four wheelers It's a hill area So you
transport tourist for going around in this uh jeeps
Not a single person had got a loan from a public sector or a private sector
Almost all from Vaj finance and SRM finance Government policies don't apply
to them They don't apply to them And what this government do even the Kerala
bank the chief minister announced that whatever loans are given in that area we are writing up Public sector banks were
told not to and now the government has amended the disaster management act
which has a provision that in case of disasters the loan can be written off So they have amended the it is under the uh
proposal they are amending the act so that even for disaster bank should not be allowed to write So this is the
tragedy of the policy in this country If you give two to two wheel
you see where is this employment they are talking about swiggies
woman all these people young boys engineering
graduates running two wheeler and for that if they have to go to paj finance and others instead of that if they get a
10% rate of interest from the public sector banks it will be a great help to
them so basically another question that I had was what are the rights of an
individual against companies like Bajage Finance or uh other companies that are
not banking but they are giving and issuing loans If you are unable to repay the loan what can you do there is no
way you can save yourself because you sign an agreement and take
the loan and they start recovering Only thing now In Tamil Nadu last month only they have
brought in a new bill against coercive method of recovery where they have
included the non-banking financial companies also Tarnada brought a bill
they excluded non-banking financial companies there saying that they are controlled by the reserve banker but
Tamilad bill had a change including non-banking financial companies micro
finance institutions money lenders if they use coercive method of lending they
can be sent to jail for 3 years due to this coercive method of lending somebody
commits a suicide that company will be held responsible that the director in
the company will be penalized Act has been brought in but that is not there in the entire country We require such kind
of a law also to protect the small borrowers The best solution will be to
increase the public sector bank branches and increase credit If credit is available there why people will go to
the cholandam and vaj they won't when it is not available
they are forced to go there the change has to be brought at the policy level what I would say is that okay somebody
wants to run a non-banking financial company let them run it on their own fund
why you ask public sector banks to give them money earlier there was a principle we
followed which has been removed You cannot give loans for on lending
Somebody cannot take loan from you and give loan to somebody else That was the principle Now that has been changed
Instead of that now they are bringing a new model called co- lending For example Adani capital the biggest borrower in
the company he starts a company called Adani Capital They get into it's a
non-banking financial company They sign an agreement with State Bank of India
State Bank of India will give the loan But Adani people will identify the borrower They will take the photograph
follow the KYC norms fill it fill up the uh loan application everything But money
will go from the state bank of this money may come back may not come back
Even if the voyer pays whether Adani people will pay back to the government
the government bank we don't know it's a very long wrong practice this government
has brought in and if we continue this practice where will the banking sector
be 10 years from now will collapse and what does that collapse look like see we
have seen the 2008 US financial crisis they were encouraging private sector
private sector and they giving large loans like this There are also this non-banking financial companies were
there giving large amounts for housing But when the crisis came they collapsed
They had to be saved by the US Treasury Some of them were allowed to die Fanny
May Freddy M like that big companies were allowed to collapse But others were
saved by providing money from the US Treasury Here also this government is
saving the private banks You know about the S bank It was in the verge of
collapse overnight It was taken over by State Bank of India and then chairman of
State Bank of India Rajesh Kumar in his memorial in the book He says that the
decision was taken at Andelia Mukeshwani's house where I was sitting
with the global investor the managing director of Blackstone
US I called the deputy managing director Prashant Kumar to come to Antilia We sat
in the car I asked him to submit a resignation from State Bank of India go to S Bank as managing director and state
bank invested money Prashant Kumar turned around the bank and now they are selling it It's already almost the
negotiation is over and who is going to buy it is a Japanese
bank it's sweet 20% of the share they are buying naturally they become the
biggest investor and owner The basic tenant of our banking system now is
privatization of profit and socialization of loss Exactly That is what is happening But like you just
mentioned Japan Japan has some interesting banking and policies in even
for corporates that one person cannot earn more than 15 times the salary of
the base working person in a country Can you quote some interesting uh
experiments or policies that have bailed out Asian nations or that has made uh
small businesses flourish germany has an practice of state level banks Whatever
is deposit is collected it has to be given as loan within that state only and that is given at a cheaper rate of
interest Japan's system is very difficult for any other
country to adopt because they are charging in service charge for keeping your deposit They don't pay interest
because there people have money which they are keeping for safe custody Here
people are depositing for getting some income also for a safe custody Even
countries like Brazil a developing country there is a development financial institution which is giving funds for
small industries microenterprises at a cheaper rate of interest and they ling it with the credit guarantee so
that even if the company is not able to repay the credit guarantee corporation
will take care of that M so it is being done in many countries and the
cooperative banking system which we adapted from the other countries once
was growing very well Now it has stagnated and there is so much of
political interference in that Now they are trying to bring more political
interference by appointing the home minister at the as the cooperative minister Some new ideas are being
floated for the common man in some of the states at least the credit access is
available especially for the farmers through the primary agriculture cooperative societies
those have to be strengthened instead of that if we are going to strengthen the private sector banks and foreign banks
they will concentrate only on the 10% of the population which has affordability
and who are willing to take higher loans they are not going to cater to the 90%
So I would suggest that we look at the experiments even in Sri Lanka the cooperative system is doing well
Look at Kerala Kerala has a Kerala bank They brought all the cooperative banks
under one banner called Kerala bank because public sector and private sector banks were not giving adequate credit
there The credit deposit ratio was down The credit deposit ratio means you take
100 rupees as a deposit You give at least 95 rupee out of that within that
state as loan Tamil Nadu the credit ratio is deposit
ratio is 107 So we get money from other states also to lend because here the
state is growing enterprises are growing banks are willing to give more Kerala so
much of NR deposits were there but they were not lending to the Kerala people M so Kerala bank was created now it is
doing well and Kerala government promoted a scheme for women called
67 lakh women are in that they are given loan they are giving training on
microenterprises they are giving a support system for marketing of their products they are allowed to come to the
exhibitions they are allowed to run cantens even in disaster relief I saw in
the kurumbashri people were given money so that the taking care of the uh
disaster relief camps and all were done So if there is a government which is
willing to help the people their own citizens who are poor there are many
models available Uh my last question to you is that we started this episode and
we discussed that there is one banking person for 2100 people in the public
sector and there's one banking person for 350 people in the private sector At the same time the way to acquire a
banking license or the way to form a bank those doors are shut Nobody can
acquire a banking license While we are saying that we need more banks more branches more officers credit to small
uh uh players small industries why are we shutting down on giving people
banking license what what is the government scared of earlier as I told you in the beginning before 1969 banks
were in the hands of industrialists They were catering to only their own friends
and relatives So a policy was brought in that industrialist
the recommendations of the RK Hazari committee they said that unless the
clutch between the industrialists and the banks are removed banking will not
reach the common man That was the idea which was brought in when the
nationalization took place If you allow private banks to flourish by giving
licenses what is the guarantee that they will not take away the depositors money
and run away we have seen it number of cases here in Tamil Nadu Bank of Tunjaw
Limited It was collapsing State Bank had to take over Bank of Kochin in Kerala it
was collapsing State Bank of India had to take over When they started giving
license for private sector the private sector banks which started for example
global trust bank for some time it was promoted as a very big bank doing so
much of service they were not following the norms so the bank was collapsing so
oriental bank of commerce was asked to take over and now I told you about the
yes bank similarly big non-banking financial companies
infrastructure finance and leasing big company suddenly collapsed Diwan housing
finance suddenly collapsed It all had to be taken over by public sector banks So
giving license for opening new banks in my opinion it should be more and more of
public sector banks in this country more cooperative banks more regional rural
banks and not for the private sector Basic principle private sector is for
profit It's not for service Public sector is for service with profit That
is a major difference Thank you so much sir I had a great time talking to you Thank you so much Yeah Okay Great