February 27, 2020
Union Minister Nirmala Sitharaman has told banks they shouldn’t blindly believe in “credit scores” of those seeking loans as branch-level connect with customers was more important. The FM rapped state-owned banks for being out of touch with customers at the ground level, saying they often failed to communicate government schemes to customers due to their inability to communicate in the local language.
The FM’s tongue-lashing of PSB chiefs came on the day she launched the next phase of reforms for state-owned banks — EASE 3.0 — that are aimed at enhancing the role of technology in the banking sector. EASE is a set of banking reforms to incorporate technological aids for ensuring better banking experience, wider financial inclusion and easier credit distribution.
“What I’ll say will not be music to your ears. But I am going to say it because we need to introspect. Today when people come to meet me, there are often worries about how, at the branch level, we can be a little friendlier,” the FM said. She said there was no branch-level connect like before. “Though we want data analytics and big data because it is advantageous nationally, at the branch level, customers expect a little personal touch from you,” The Times of India quoted the FM as saying.
The FM added that lack of branch-level contact had eroded all the goodwill, which had not done anything good for the country. Stressing the need for ground-level motivation, the FM said the benefits had failed to reach end-users as banks were failing in keeping a local touch. “RBI will come back and say you borrow from me at a much lower interest rate…I can go on meeting you but it’ll still not reach the customer,” she said.
She also said that banks should not consider rating agencies’ assessment of the creditworthiness of customers on face value but only as “indicator”. She said bank officials needed to be more “responsive” and show customers they wanted to give loans or explain why they couldn’t.
The FM flagged several areas where urgent attention was needed to improve state-owned banks’ efficiency. She said there was over-reliance on data from credit rating agencies. She asked PSB chiefs if the RBI or IBA ever communicated to them to “blindly” follow rating agencies. It should be a judicious mix of local connect and data, she stressed.
Sitharaman was miffed about how many branch-level officers at state-run banks did not know public welfare schemes well enough. She suggested that IBA should sensitise bank branches about government schemes.