To facilitate smooth business, banks must excel in maintaining a balance between providing credit and promoting social good. This alone will bring transparency and improve living standards
As per Section 22 of the Banking Regulation Act, 1949, banks, while doing business, have to serve public interest and they should not do anything which is detrimental to the present and future depositors’ interest. Serving public interest while doing business is a tough balancing act, which the banking sector has to perform.
Credit should generate surplus income with entrepreneurs after it creates the much-needed economic assets. Dedicated credit appraisal helps bank understand the borrowers’ capacity to earn and repay loan. But that is not sufficient for a smooth banking business.
In the past decade, many big corporate loans have turned into non-performing assets (NPAs). Clearly, business philosophy has to change from maximising profit by any means to create an environment for the mutual growth of all stakeholders. The aim of business should not create cheap human labour but create capacity among people to improve their earning and living standards.
Banks alone cannot serve public interest unless business entities find reason to serve the real social good with patriotic zeal. The scope of banking in India is immense. But without good governance and good intention, everything falls apart.
Punganur, a block located in Chittoor district in Andhra Pradesh is famous for tamarind. Traders collect tamarind and give it to village women for processing. Nearly 5,000 women are engaged in the processing of tamarind. A majority of the women are member of Self Help Groups (SHG). But the tamarind trade is controlled by a handful of traders who use SHG members as cheap labour force.
As the women are illiterate, they do not know who takes the loan on behalf of the SHGs and for what purpose. In a transparent market chain, the women could earn double the income they presently earn. Here, good governance can remove illiteracy and backwardness. It will make the women aware of the market so that the women lot can do the tamarind processing on their own or do it in SHGs. Banks can’t serve public interest unless the Government educates the women and protect them from disguised exploitation.
Thousands of women in Madurai district collect wide range of medicinal herbs, shrubs and roots for more than 20 big traders who supply those raw material to a number of pharma companies. A majority of the village women receive Rs 20 to Rs 50 per day from traders. Many villagers are engaged in processing the herbs in a hazardous environment. Herbal trade can give enough income to those villagers if the companies directly collect the raw material from the villagers. Here, banks can serve social good by sanctioning loan to really good NGOs who can ensure the income the villagers always deserve. Many NGOs work with business motive only. Here banks can serve public good if it takes extra pain to identify good NGOs.
Weavers of Nalgonda, Karimnagar and Mahabunnagar of Telangana weave silk and cotton clothes for domestic and international market. Here bankers should finance genuine weavers directly. Only financing will neither help the banks nor the weavers. Banks have to identify genuine marketing agencies or NGOs who can market the handloom products.
A majority of the weavers are surrounded by middlemen in different guise who thrive on the hard work and creative skill of innocent weavers. Good bankers should come to the rescue of the weavers not with their credit products only but with good intention to liberate them from the clutches of middlemen. local political representatives and educated people should play the role of anti-heroes to save the weavers who have given the State an identity in the art world.
Providing bank credit to weavers only will not help the situation. A gamut of development schemes and subsidy are of no use if Government does not restrict the import of cheap cotton, silk and yarns from other countries. The Union Government, State Governments and public representatives have to popularise handloom products. Both banks and Government departments must have synergy to promote weaving traditions.
There is no dearth of subsidy linked development schemes nor availability of bank credit. There is always scarcity of honest and efficient officials with deep knowledge on handloom traditions who can save the weavers with the proper implementation of development schemes. If an official does not have respect for the weavers and he can’t make out a genuine handloom saree from power loom sarees, he is of no use.
If officials work hand-in-gloves with the traders and middlemen, they can spell doom for the weavers. Bank credit will perform if the weavers happily receive the remuneration they deserve. There is a need for change at the bottom level so that the banks could roll credit and get it back too.
(The writer is a freelance commentator)