Concerned over the discriminatory pricing mechanism adopted by the banks, the Reserve Bank of India (RBI) is likely to come out with a new set of norms on January 4 that will provide the apex bank a supervisory role.
Currently, banks are free to fix their own prices for products. Speaking on the sidelines of a book launch organised by Indian Overseas Bank here on Sunday, RBI deputy governor K C Chakrabarty said, ?When the RBI governor addresses the Ombudsman Conference on January 4, some sort of guidelines are expected to come up.?
Refusing to divulge any further details, he said a supervisory role addresses consumer protection issues and it was one of the agendas of G20 reforms.
?What we will look at is whether there is any discrimination among the customers. The banks must convince that the pricing of products was based on proper risk management and the logic behind it,? he told reporters.
Asked whether the RBI wants to take control of pricing again, he said, ?All we are asking is whether you are doing the right thing and examine that. Look at risk-based pricing. If banks charge too much interest rate, good customers will not come. When the prices are too high, entire society is blaming RBI only and I am not happy about that. If price becomes exploratory, then we will intervene as we did in microfinance,? said Chakrabarty.
Justifying the need for supervisory mechanism , he said banks provide education loan at 17%, while housing loan is cheaper at 10.5%. ?Which is more important? Education will change the fortune of the country. Banks must explain the risk perception based on which they charge,? he said.
?All we are asking the banks to do proper risk management, pricing and understand customer needs. Do not discriminate when it comes to pricing…A board-approved proposal quickly gets restructured, but a bank manager approved loan is not. Data indicates that the large borrowers have invariably received the benefit of restructuring loans, while the restructuring in case of SME/ agriculture loans have remained abysmally low,? the RBI deputy governor said.
On the contentious NPA issue, he said, ?The ability to manage NPAs is important. An attitude of complete risk aversion would also not be appropriate as banks are in the business of taking risks, but with adequate safeguards. Rising impaired assets is a governance issue as banks have forgotten the art of saying no except to small borrowers. The banks need to significantly improve their risk assessment capability and their ability to price risks.?
?I believe that the need is all the more pronounced in the case of public sector banks, which, at times end up with assets that have been excited by private sector/ foreign banks on account of inherent weaknesses.?
