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Housing finance companies (HFC) should also be brought under the purview of the Reserve Bank of India (RBI), said Pratip Chaudhuri, chairman of State Bank of India (SBI), the country’s largest lender.
"I see no justification for having a separate regulator for home loans. Perhaps, the objective of the regulations is better served with RBI itself becoming the sole regulator for all loans, including home loans. In no other country do we have different regulators for different verticals such as industrial loans, home loans and vehicle loans. Why should it be so?" asked Chaudhuri. He was here to attend the fifth ICC Banking Summit.
Currently, RBI regulates the home loans provided by all commercial banks operating in India, while housing finance companies are regulated by National Housing Banks.
Chaudhuri pointed out that banks accounted for more than two-third of the total home loan disbursed in the country, and a "single" regulator would help in removing the regulatory arbitrage that exists between banks and HFCs.
The SBI chief further said the minimum tenor for bank deposits should be brought down to three days from seven days to make it more flexible for the depositors. "This (minimum tenor of seven days) was right in a situation when there were no daily investment instruments available," he said. "So, we have made a request to RBI to reduce the minimum tenor from seven days to three days. The liquidity risk is not very different from a seven-day deposit and three day deposit, but the question is why make the banks handicapped."
Chaudhuri once again stressed on the need of paying interest on the money locked in central bank under the cash reserve ratio (CRR). It is the minimum percentage of cash deposits that banks must keep with the central bank. “A CRR cut would really help the economy, but if that is not possible at present, RBI should pay around six per cent interest on the money locked in as CRR. SBI alone locks in around Rs 60,000 crore with RBI.”
The SBI chairman later added that he was expecting the March quarter NPAs (non performing assets) to be better than the December quarter. He hinted that the bank would pump more core capital into the domestic business expansion than overseas.
"Overseas business margins are under pressure. My sense is domestic RoE (return of equity) is significantly higher than the overseas business. Therefore, it may not be very useful to put more tier I capital, but it is more productive and useful and efficient to raise tier II bonds overseas," Chaudhuri added.
Currently, the state-run bank has 185 branches overseas.
‘Campaign against fraudulent schemes’
RBI or the Seruties and Exchange Board of India (Sebi) should do a mass media campaign in the lines of 'Jago Grahak Jago', which will make people aware about fraudulent schemes.
“The campaign should inform that when one is depositing the money whether it is insured by Deposit Insurance Corp (DIC). Banks should be allowed to put up a display inside branches saying the deposits are DIC-insured and if even after these measures someone chooses to deposit their money in other avenues, then a that is their choice,” said Chaudhuri.
