Reserve Bank of India Deputy Governor K. C. Chakrabarty, on Thursday, asked bankers to desist from misguiding investors by giving false impression blaming the system-driven non-performing asset (NPAs) figures for the fall in their profits.

Bankers “misguided investors for the past five years by not giving proper NPA figures,” said Mr. Chakrabarty while addressing the CII’s 7th edition of Banking Tech Summit here.

At the end of last financial year, some banks, including state-run banks, have reported fall in profits which they had attributed to the migration to the system-generated mechanism to identify NPA figures.

He asked the capital market regulator Securities and Exchange Board of India (SEBI) to look into these issues, as these banks were listed entities.

“We have to live with NPAs. But it has come down drastically from an earlier level,” said D. Sarkar, Chairman & Managing Director, Union Bank of India. “I do not want to negate what he (Mr. Chakrabarty) said,” opined M. V. Tanksale, Chairman and Managing Director of Central Bank of India.

These two banks have reported higher NPAs in the last financial year which brought down their profits. Mr. Sarkar and Mr. Tanksale together met journalists on the sidelines of the conference after Mr. Chakrabarty’s speech.

Stressing on customer focus, Mr. Chakrabarty underlined the necessity of assuring customer protection in a technology-led banking scenario. He felt that “negligence of customer should be proved and the onus of proving must be with the bank”. He also brought home the point that neither technology nor business correspondence alone could generate business without the customer.

“The most important pre-requisite for any technology is standardisation. Standardisation of devices such as ATM, and even account numbers is very important,” Mr. Chakrabarty added.

Countering the criticism levelled on the regulatory body, Mr. Chakrabarty observed that “there is a thin line of demarcation between what can be called an ‘innovation’ and a ‘violation’. Our job is to stop the latter.”

He further said that “we cannot go from a poor to a developed nation without technology and innovation but it is our job to reduce negative outcomes of technology and innovation while retaining benefits.”

Differs with FinMin

PTI reports:

Within a fortnight of Finance Ministry asking banks to make electronic fund transfers under Rs.1 lakh free of cost, Mr. Chakrabarty, on Thursday, said the idea was not commercially viable.

“We firmly believe that anything that is free of charges can never be scaled up, it cannot be made robust unless there is commercial viability...I don’t think anybody will be able to provide this service free of cost; this is just not possible,” he told reporters.

After a meeting with the chiefs of all public sector banks, the then Finance Minister Pranab Mukherjee had said electronic fund transfers under Rs.1 lakh should be made free as “we proceed to being a paper-less economy”.

Such a move would also help remittances and cash transfers of governmental payments directly into beneficiary accounts, experts said.

Elaborating, Mr. Chakrabarty reminisced about the RBI experience when it had made automated teller machines (ATM) usage free, saying people were using it just to check account balances.

“Anything which is often free in this country is misutilised, we don’t understand the value of a product or service,” he said, stressing on commercial viability aspect.

Mr. Chakrabarty, however, qualified his remarks, saying while it did not refer making the service free, banks should also not charge customers in an “exploitative” manner.

Asked about the Finance Minister’s request to make the NEFT transfers free, SBI Chairman Pratip Chaudhuri said, “it’s a Rs.5 charge, what are we talking about? I think it is too trivial.” He said the charges should be compared with the money order alternative, wherein sender was charged a fee of Rs.250 for Rs.5,000 whereas banks charged just Rs.5.

Central Bank of India CMD M. V. Tanksale said objectives of the Finance Ministry and banks were not divergent.