The Banking ecosystem in India needs to be replaced with an entirely different biome. After Indias Independence most of the laws framed were already in existence during Britishers time or the new laws and institutions which were created borrowed from Colonial Hangover. And also few policies and institutions came up due to the then government’s inclination towards Communalism .
Britishers had a good economy as they had built a great empire by looting India . But we India following their footsteps was a disaster, in case wehad followed Japan’s banking system , then we could have become the 05th largest World’s economy by 1990’s itself .
Our social conditions did not want a Bank providing Loans at interest more than 30% per annum . The Banks either playing only as an interface between A Deposit Holder and a Loan seeker, should have been an interface and played the role of Cooperative Investments Banking. Any country flourishis with its people’s employment and the taxes they pay . India coming out of Independence should have had a plan for more industries to come up and as then agriculture was the main occupation we should have gone towards investing heavily on Logistics – Supply Chain . For that Private companies and other learned people wanted Investment . Instead of collecting Deposits from Bank customers and lending it to others at huge interests , Banks should have signed up for investments. A Governing Body for recovery and no diversion of funds from the invested companies other than their core competency would have opened a New Era of Opportunities. This would have enabled India and newly educated audience to start new industries as these Industries were a major employment generator then, invested on Local Arts and existing business models which would have thrived if investments were there. For example : Channapatna Toys . If educated people would have been provided Capital , they would have used for the marketing of these Toys in collaboration of the Artisans. So instead of Lauging Buddha or any oher items showcased at homes or office tables could have been Channapatna Toys. And in 1950’s most of the consumer products like were still Swadeshi products , and these products would have made inroads into most household items around the world by now.
My emphasis on bringing the above points are to show the ill effects of the Banking System which we have now and how it affected our country’s growth decades back as well.
People having Bank accounts, that too Deposits are still an affluent Class. It is just few % of the present population , that too India being the 05th Largest economy now . These people just have parked their money in the Bank , doing nothing and are taking an substantial amount every month as income from interest. People having Bank accounts, that too Deposits are still an affluent Class. It is just few % of the present population , that too India being the 05th Largest economy now . These people just have parked their money in the Bank , doing nothing and are taking an substantial amount every month as income from interest
TOf course I am aware there are senior citizens, widows , disabled as well depending on it. I am not here to snatch their income but just check the percentage. For them the government can provide higher interest as a Social Welfare Scheme. What about the rest of the depositors? They are just parking their money. NOW, if we have 0% interest given to them for deposits then imagine the Capital flow in the market ? Of course there are a lot of guidelines, Security Frameworks for the money invested , Quick resolution of the disputes arising from investments all need to be addressed but that is a different subject once we have the 0% interest policy in place.
Just 01 Bank in India is sitting on a deposit reserve of 15 Trillion . Imagine the amount parked in India in all the Private MNC banks, Nationalised Banks, NBFC’s andCooperative Banks .
How many cooperative banks are there in India in 2022?
The Indian banking system consists of 12 public sector banks, 22 private sector banks, 44 foreign banks, 56 regional rural banks, 1,485 urban cooperative banks, and 96,000 rural cooperative banks in addition to cooperative credit institutions. If all these money come as a Capital to the market as investment and if the same customers start investing on Businesses then India will turn into a Numero Uno position in a decade.
Now your question might be , isn’t the banks providing the same amount as Loans for higher interest rates and providing the depositors income as interest . My question here is – is this present system generating more employment and solving most of our country’s problems or the new proposal of mine of 0% interest more beneficial ? Which of these 02 is the best for the progress of a nation ? Do we want to feed an Interface which collects money from depositors and lends it to higher interest rates for Industries, Companies to make huge profits ? Do we want only the positors who do nothing but only park their money to make Profits ? r the Borrower who is working and is also employing through which creating Wealth among people to make Money ? Whom do we need to support ? Interface or an Idle Depositor or The Worker ?
I will illustrate with an example. With present banking system – Ex :- A Baker wants to open a Bakery with three helping hands. She needs a minimum investment of Rs 10 lakhs which includes Shop Advance, interiors , Materials required for a Bakery and etc. She has 02 lakhs in Hand. Now, she needs to take 08 lakhs loan from a Bank . The Bank has money but it’s a Start –Up they will ask for surety and other related documents for sanctioning the loan. After the woman gets the Licence from Food Standard Satety , Municipal body licence and other licenses , it will take a minimum of 03-04 months before a bank approves a loan for her. And the amount loan approved will be 05Lakhs. Now she wants 03 more lakhs which will be take a Local Financier who charges her 36% per annum interest . The place which she had seen to set up a shop, that owner would be squeezing rent from her for blocking the shop space and she has to pay even though she is not earning anything.
Now, here the Bank can giver her a Loan by understanding the dynamics of the business she is into. They could have given Demand Drafts for all the materials , Shop Advance and Interior bills . After which they could have given her a minimum capital of around Rs 01 lakh to run the shop for 03 months till the business picks up. In this way her business would have started from the word GO, and they would have also got the clarity that the business is being set up and employment for a couple of people woud have been generated through this business. BUT, Banks does not do all these . They ask for surety , sit on the file for 03 months . give half the required loan amount for which EMI will start immediately and the woman will be in no man’s land. All this, though themoney is available through Public and the lender is ready . The attitude over here because of the Bank Employees is :- They are not losing anything. The interface makes huge profits and if there is negative also they ask the Government to bail them out. Government if bails them out, it is again people’s money itself.
Ex 02 : If banks work as Cooperative Agency and Investment Bankers then, it will be only a few weeks process. They inform that a Woman is investing in a Bakery and looking out for 08 lakhs investment as she already has 02 lakhs Capital. Interested investors will invest and the % of profit sharing can be discussed and , agreements signed and the business will start to function . In this way all stakeholders will be happy and in case of failure of business , it will be distribution of losses and again it can be taken over by another company to ensure the investments of the people are safe.
The above example is just a glimpse to show you all how Investment and Cooperative Banking works. In Japan, just because they have the above model , they saw an Economic Miracle, actually it was not a miracle, it was the cooperative of the people and the Government’s intention to make people work as a Team and to ensure the working hands earn more than people sitting idle.
Therefore the present Baning system kills , not a good eco system . It needs to be changed to the formar and structure as illustrated in the second example of mine. Then even India can see an Economic Miracle similar to Japan.