Parl Panel for opening branches in unbanked areas
New Delhi: In order to promote financial inclusion, a Parliamentary panel on Monday said banks should open branches in rural and unbanked areas and treat them as "service centre" instead of "profit centre".
"The Committee in their earlier reports had expressed their view that the rural branches should be considered as a service centre and not merely as a profit centre," Standing Committee on Finance said in a report tabled in Parliament today.
"With this perspective in view, the Committee believe that the proposition of brick & mortar branches in sparsely and unbanked areas would still be sustainable in the longer run and thus needs to be pursued earnestly," it said.
The Panel, headed by Yashwant Sinha, recommended the Finance Ministry to provide necessary support to the banks, PSBs in particular, to open brick & mortar branches in unbanked areas on "mission mode".
The Committee have been emphasising that no other model can substitute brick & mortar branches in achieving the goal of financial inclusion, it added.
The banks may also extend financial inclusion through measures such as Ultra Small Banks (USBs), mobile banking, village adoption scheme, weekly bank for village clusters etc, it said.
In the meantime, it said "the Ministry may review the Business Correspondent (BC) or Business Facilitator (BF) model for better results in the interim, while ensuring that it should not become an instrument of exploitation of the rural poor."
Social obligations on the part of private banks must also be strictly enforced, it added.
Expressing concern over the rising bad loans, the panel asked the Government and RBI to constitute a special NPA (Non-Performing Asset) Management Cell at the highest level to review the write-off or up-gradation and restructured advances and also to monitor the pace of recovery of NPAs.
The Committee are alarmed to note that NPAs of Public Sector Banks (PSBs) registered substantial increase during the recent years, it said.
"To cite specific instances, while the average Net NPA Ratio of PSBs reached as high as 2.10 in December, 2012, the Net NPA Ratio of UCO Bank was 3.31; 3.28 in respect of Central Bank of India; 2.78 in the case of Punjab National Bank; 2.65 in the case of the largest bank in the country i.e. State Bank of India (SBI); and 2.19 in respect of State Bank of Patiala," it said.
The Committee are perturbed to find that during the years 2010-2012, the number of accounts of Gross NPAs above Rs 1 crore of PSBs increased by around 80 percent to 7,295 accounts from 4,099 accounts, it said.
Major increase in these accounts were reported in banks such as State Bank of India, Bank of India, IDBI Bank Ltd, Indian Overseas Bank, Punjab National Bank, and Union Bank of India, it added.
On Agricultural Debt Waiver and Debt Relief Scheme, 2008, the panel said a number of discrepancies in implementation of the scheme ranging from exclusion of beneficiaries to violation of guidelines in reimbursement of loans has been recently reported.
The Committee, therefore, urge upon the Department of Financial Services to set up an exclusive monitoring wing for the implementation and monitoring of various schemes under its jurisdiction, it said.
Further, it said, in order to preempt such large scale deviation from the envisaged objectives of the schemes, the Committee desire that the Department of Expenditure should oversee the outcome of expenditure periodically in such big schemes.
On capital infusion in public sector banks (PSBs), the panel noted that when the country is facing fiscal deficit and resource constraints, the government has been infusing huge amount towards capitalisation of such banks.
The Committee are of the firm view that the extant practice of following easy route of capitalising PSBs from the budget would not only numb the PSBs but may also make them inefficient.
"Considering the fiscal consolidation and the need for maintaining capital adequacy in PSBs to meet BASEL III norms, the Committee expect the Ministry to propel PSBs to generate funds internally also for their recapitalisation instead of depending on budgetary support alone," it said.
The Finance Ministry needs to expedite the process of setting up the financial holding company at the earliest to meet the capital requirements of PSBs.
"The Committee had been consistently recommending to take corrective measures to arrest such an erratic trend of projection of fund requirements and formulate realistic estimates," it said.
However, it said, substantial reduction in Revised Estimate stage and consistent underutilisation of funds indicate that there is no discernible improvement.