Banks should improve service: FM

Banks should improve service: FM

Action Point: Pranab Mukherjee asks banks to build capital buffer to beat cyclical downturns

Days ahead of the Union Budget,finance minister Pranab Mukherjee painted a rather gloomy picture of the economy and asked the banking sector to build capital buffers for cyclical downturns like the global financial crisis of 2009.

“After the global financial crisis,recovery has been slow,protracted and uncertain,” Mukherjee said on Saturday after inauguration 100 branches of Federal Bank. His comments gain significance after recent data point towards a downturn in economic activities.

The economy grew at its slowest pace in the over two years at 6.9 per cent in the July-September quarter as high interest rates and inflation ate into companies’ expansion plans,while weak global demand has hit Indian exports. Lower than expected tax collections as well as lesser realisation from disinvestment receipts have also impacted the fiscal deficit that has already overshot the full year target of 4.6 per cent.

The minister also asked banks to enhance their capital base as it would not only help support higher credit growth but would also help prevent against cyclical downturns.


“The banking and financial system is currently undergoing structural transformation with standard setting institutions and national authorities framing new regulatory paradigms to address the weaknesses that emerged during the financial crisis,” he said.

Mukherjee also asked banks to work on the objective of financial inclusion by adopting the best worldwide practices,best technology and suitable financial products as it would help the government meet its goal of inclusive development.

But opening bank branches was not enough,as the minister said,“Financial inclusion and consumer trust are interlinked.”

Concerned over the high number of complaints against private sector and foreign banks,Mukherjee asked them to focus on improving customer service.

“It is heartening to know that as per the latest annual report of the Banking Ombudsman Scheme,the total number of customer complaints received by the Ombudsman in 2010-11 are 11per cent less than the previous year,” he said,adding,“However,private sector and foreign banks which account for only 12 per cent of the rural deposits,contribute 35 per cent of the total complaints.”

During 2010-11,71,274 complaints were received under Banking Ombudsman Scheme against 79,266 the previous fiscal.