Several Founders, Co-Founders, CXO Bankers, CXO Fintech professional & people who participated in the ePanel discussions:
- Mr. P D Singh, Former General Manager, Bank of Baroda
- Mr. Rajesh Bhojwani, CEO at Vakranjee Limited
- Mr. Rakesh Watal, Senior Vice President, HDFC Bank
- Mr. PB Prakash, Head Financial Institutions Group, IndusInd Bank
- Mr. Neeraj Chandra, Head of Operations & Technology, Abu Dhabi Commercial Bank
- Mr. Hemal Shah, Technical Product Manager, Mastercard
- Mr. Prasad Likhite, Director at ACI
- Mr. Brahma Mahesh Khaderbad, Co-Founder & CEO at FinMomenta Pvt Ltd
- Mr. Prasanna Divekar, Former Head NRI Business, Overseas Offices, HDFC Bank
- Mr. S Ghosh, Associate Editor, Economic Times
- Dr. R Bhaskaran, Former Chief Executive Officer, IIBF
- Mr. Yogesh Gupta, Former Head Online Remittances- Money2India International Banking Group ICICI Bank
- Mr. SK Datta, Former Advisor & Chief General Manager, Bank of India
- Mr. Ruchir Inamdar, Co-Founder, Quikepic Technologies Pvt Ltd
- Mr. Jayesh Shah, CEO, Prism Cybersoft Private Ltd
- Mr. Prabhanjan Dhotre, Director, Beehive Capital Advisors Private Ltd
- Mr. Abhishek Mody, Associate Director-Payment & Digital Initiatives, IDFC Bank
- Mr. Kamonasish Aayush Mazumdar, Former Chief Marketing Officer, MeraEvents
- Mr. Vikas R Panditrao, Co-Founder, Forum of Industry and Academic Knowledge Sharing (FIAKS)
- Many CEO/CXO Bankers & Fintech professionals and Founders on FIAKS Forum who participated in the discussions had requested to remain anonymous
A sudden bolt from the blue which left people in an oblivion state in the recent PMC bank crisis. Upon this FIAKS community members raised some crucial questions. Before that have a look at this shocking headline;
Question 1: Are large private sector banks trustworthy? OR trust them only up to 1Lakh?
Question 2: Why can’t banks share month on month reports on all the loans that have defaulted like 100 customers, 98 paying interest, 2 defaulted and the reason for default and action taken before we keep large amounts as fixed deposits?
In response, a member shared that banks always share the list of defaulters with credit information bureaucrats like CRIF, CIBIL, etc. Banks do share with RBI as part of monthly and quarterly reporting. It isn’t full proof, cause then HDIL would have been caught more quickly as a bad account.
Question 3: Where should the people keep their hard-earned money now?
- Option 1- Real estate? Everyone is well acquainted with how the builder takes the money and delay possession of flat or declare bankruptcy? Aren’t we?
- Option 2- Mutual Funds; we all know what’s happening there? Don’t we?
- Option 3- Stock Market; what’s the way forward?
Let’s first address the issue of the hard-earned money of people:
- For hard-earned money, asset allocation should be the key. In the current scenario real estate should be limited to the house you stay, gold limited to the jewelry and rest split between equity and debt. Historically maximum wealth creation has been in good businesses so having the best of the businesses through mutual funds and direct stocks will outdo all asset classes over a long-term period.
- The only option in the current scenario is to deposit with large “too big to fail” Returns will be lower than smaller banks but there will be very little risk of loss of capital. If a large bank is allowed to fail then you can be sure that the government & the country has failed & you have no other options.
- SBI, ICICI Bank & HDFC Bank are identified as “Domestic Systemically Important Banks (D-SIBs)”. We can take these to be the “too big to fail” banks. [1] RBI Report PNB & BOB can also be taken in too big to fail category, though they are not yet identified as D-SIB by RBI.
One of the community members shared a quite insightful thought- ‘It is okay for equity investors to lose money, it is okay for debt investors to lose money, it is okay for commodity players to lose money because their profit comes from risk-taking. But it is absolutely unacceptable for a bank depositor to lose money because that means the foundations of our financial system is shaking. Bank deposit is not investment, bank deposit is money (M3 – Money Supply = Notes in Circulation + demand and time deposits with banks). So, the banking regulator is duty-bound to ensure that depositors who have put their money in the bank instead of keeping it under the bed are not punished for that. But the regulator failed miserably in this basic duty and we have a PMC Bank liquidation in our hands. If RBI is a professional set up, several heads should roll for this but at least RBI should make good the losses of all depositors from their reserves they have so zealously built up over the years. That will be a far better use of reserves than transferring to Government to fund their socialistic extravaganzas.’
So now, should there be zero autonomy for all banks? Let’s detail this out;
- Whether it’s Private or PSU, all scheduled banks are governed by RBI and adhere to capital adequacy, liquidity norms and keep CRR and SLR which in itself means keeping 30 paise of every rupee aside.
- We haven’t seen any private bank failed and any such bank is taken over by others. People have lost money in many co-operative bank scams but it is unheard that any depositor losing money due to bank failure in India.
- While banks are obligated to declare NPAs, most manage NPAs due to performance pressure. While RBI does an inspection of banks and bank audits happen in every bank it becomes difficult for an auditor to identify such cases managed by the bank.
- Autonomy is not the enemy of prudence. Banks have capital requirements and liquidity requirements to ensure prudence. It is RBI’s job to ensure they abide by that. If they fail (for whatever reason) they are accountable for the consequences.
- Simply put RBI slept on the wheel but now we want depositors to pay the penalty.
- RBI should then be the sole decision-maker in where and how much the banks can invest or what and how much risk they can take and also total control over the interest rates and complete control over all the boards and all the banks’ profits should go to RBI.
- RBI has the power to increase risk weights of asset classes or increase liquidity ratios if they perceive a higher risk in any scenario. The point is they have no clue to assess the risks or regulate the banks appropriately. If we say bank deposits are investors, then banks should be regulated by SEBI and not RBI.
Then, depositor protection is whose duty? Register And Read the entire discussions