Banks in India always dilly-dally when it comes to passing benefits of rate cut to their customers. The latest is RBI's moratorium on EMI for three months following country-wide lockdown amid coronavirus outbreak.
With just two days left for the next EMI cycle to begin, even big lenders haven't announced EMI relief to customers. Top lenders such as State Bank of India, HDFC Bank, ICICI Bank, Kotak Bank and Axis Bank have not activated any channel for customers to exercise an option.
Resultantly, borrowers are confused as many have received messages alerting them that their loan EMIs would be debited from their accounts. From tomorrow (Wednesday), banks will start auto debiting ( from the borrowers choosing this option) monthly installment from borrowers accounts. Banks are not prepared to implement the special facility created by the RBI, which allows borrowers to avoid paying three EMIs without being classified as a loan defaulter.There is also an option for borrowers to keep on paying regularly.
According to economic survey, there was no transmission of the cut in repo rate by banks to customers in 2019. According to the survey 2019-20, the existing borrowers did not benefit from the Reserve Bank of India's (RBI) repo rate cut throughout the year 2019-20. The Weighted Average Lending Rate (WALR) of Scheduled Commercial Banks (SCBs) had not declined at all in 2019 despite reduction of repo rate by 135 bps since January 2019, says survey.
On the other hand, there was a sharp cut in fixed deposits rates by 0. 50 % Since Jan 2019 to till today. From 7.25 to 7.50 % in 2014, it has come down to 3.00% - 5.50% in 2020. As such, banks have benefited both way . They were benefited by cut in repo rate and earned more interest on home and consumer loans from hapless customers. At the same time, by reducing interest on fixed deposits, they minted more money. It may be recalled that interest on PPF and EPF has been over 8 %.
Till 2014, the Weighted Average Term Deposit rate was same as that of PPF and EPF. In 2014, rapo rate was 8 % and it is now 4.4 %, meaning a reduction of 3.6 % in key interest rate. But, banks have just passed less than 1 % to customers since then.
Net profit of listed private banks stood at 38,022 crore in 2014-15 and public sector banks (PSBs) at 37,520 crore . The net profit of PSBs rose 1%, while that of private banks increased 15% over in 2014. The combined revenue of private-sector banks stood at a whopping Rs. 1.17 Lakh Crores and a net income of Rs. 21,078 crores in the year 2019. Kolkata-based Bandhan Bank alone reported a profit of Rs. 971.8 crore.
Banks in India have just looted their customers and unfortunately, there is o check on them. Even RBI directions are openly flouted.
(Chander Sharma)
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