The Hindu : National : Centre rejects PSU banks’ demand

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Centre rejects PSU banks’ demand

K. Balchand

They sought exemption from operating accounts opened for paying NREGA wages

Leakages had been reported when wages were paid through cash
Centre’s move said to be a chance for the banks to earn profit with ease

NEW DELHI: The Centre has expressed its displeasure with the public sector commercial banks for their negative approach in operating the accounts opened to facilitate payment of wages earned under the National Rural Employment Guarantee Act (NREGA).

Rural Development Secretary Rita Sharma has termed as a retrograde step the demand by PSU banks to be spared from operating the six-crore odd savings accounts opened on a war footing, considered the largest financial inclusion the world over, as they did not regard it as viable. Ms. Sharma told The Hindu that the demand was unacceptable and the banks had been told in no uncertain terms that they not only had to continue to operate but also open fresh accounts as and when necessary. It has been pointed out to the banks that it was statutorily mandatory to pay wages through accounts operated either through banks or post offices.

Wage payment through cash was a violation of rules and the measure had been initiated to check leakages that have been reported when the wages were paid in cash.

Much as it had been surprised by the stand of the banks, the United Progressive Alliance government could ill afford to allow the scheme, which was said to have swayed the Lok Sabha elections considerably in its favour, to fall a prey to corrupt practices.

Ms. Sharma also pointed out that both the President and the Prime Minister had made it clear in their statements that payments under all social security schemes including pension and scholarship to students would have to be done through savings accounts only. The new insurance scheme would be operated through bank accounts only. Hence these banks would necessarily have to open many more millions of accounts as part of the government’s policy. “They are not doing a favour or indulging in some sort of corporate responsibility. It is a financial and commercial proposition.”

Good interest

In Ms. Sharma’s assessment, at least Rs. 21,000 crore had been paid as wage component out of the Rs. 30,000 crore spent under the NREGA in 2008-09. The banks would have earned a good interest on this corpus even if they had retained it for a period of just 25 days. Moreover, the wage-earner usually was not expected to draw all the money from his account at one and the same time and a savings of even 10 per cent left a good Rs. 2000 crore with the banks to earn a profit without much effort. The government was equally keen not to lose the opportunity to help build confidence in these first-generation bank account-holders in the rural areas in inculcating a sense of savings, which in the long run would turn out to be a better commercial proposition for the banks.

The government expects the banks to be more innovative while expanding their business in rural areas and increase their services and make their system more effective. It is a moot point whether the banks had sought to wriggle themselves out of this responsibility as under the NREGA the gram sabhas are expected to socially conduct the audit twice each year. Apart from government officials, all those involved in the execution of the scheme, including NGOs and banks, would be subjected to public scrutiny.

The step had been taken to exert community pressure on the executing mechanism to be more accountable in their dealings.

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