The Confederation of India Industry (CII) has charged the Indian Banks Association (IBA) of engaging in restrictive trade practices by fixing the minimum charge on differential services for all its members.
IBA represents all the 27 PSU banks and 25 private sector banks. Nearly 29 foreign banks operating in the country are also members of the association. The apex chamber has said that banks would have to start taking responsibility for delays in the clearance of instruments and has added that it is essential for banks to improve the quality of their services.
Even in cities like Delhi, Mumbai, Calcutta and Chennai, all banks do not participate in clearing activities on all days leading to a longer clearing cycle, according to CII.
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It has asked the Reserve Bank of India (RBI) to immediately address this issue and has demanded daily clearing facilities.
The Confederation of Indian Industry has pointed out that banks have been going slow on credit growth though they are flush with funds.
Bankers are afraid that their commercial decisions may be viewed negatively in future if they go wrong and the Central Bureau of Investigation (CBI) may initiate probes into their dealings.
The chamber has called upon the central bank to remedy the current situation where although deposit growth is high in the banking sector, bankers are apprehensive.
Although the prime lending rate has been inching down, average borrowers still have to borrow funds at 18-20 per cent. With inflation standing at around 7 per cent, the real rate of interest is around 11-13 per cent which is on the higher side, according to CII.
CII has suggested that the current PLR which is at 14.5 per cent (State Bank of India and Bank of Baroda) is too high and needs to be brought down if corporate houses have to borrow.
CII has demanded that CRR should be reduced to an ultimate level of 5-6 per cent over a period of time.
The Reserve Bank has brought this down from 14 per cent at the beginning of the current fiscal to 10 per cent in January, 1997, in effect releasing Rs 17,850 crore into the system.
CII has asked RBI to fix the cost of post shipment finance credit at LIBOR plus 2 per cent in order to enable exports to be internationally competitive and has also asked the central bank to re-introduce the facility of post-shipment credit in dollars.
The chamber has also asked the Reserve Bank of India to liberalise the concept of collateral security and margin security.
The CII, in a meeting earlier this month with senior RBI officials, has asked the apex bank to do away with the concept of consortium lending to make the availability of working capital finance easier for the corporate sector.
CII has added that if this is not possible at the present juncture, the fund-based limits for consortium loans should be above Rs 200 crore from the existing ceiling of Rs 50 crore.
The RBI had, in the credit policy for the second half of 1993-94 announced the raising of the limit of working capital finance for obligatory consortium arrangement from Rs 5 crore to Rs 50 crore.
In its busy season credit policy for 1996-97, the central bank decided that whenever a consortium is formed, either on a voluntary basis or on an obligatory basis, the ground rules of the consortium arrangement, viz, number of participating banks, minimum share of each bank, entry and exit from the consortium etc, would be framed by the participating banks in the consortium.