Commercial banks must encouraged to offer preferential rate of interest to the physically and mentally-challenged people

On reading the article on “RBI Monetary Policy for 2012-2013: Policy on deposit rates requires change” published in the Moneylife Digital Newsletter dated 2 May, 2012, my  good friend, Mr Nagesh N Kini made a very crypt and apt comment. He said, “instead of giving higher rates to rich and the ultra-rich, the RBI should consider giving higher rates to disabled/physically-challenged and charitable institutions who promote their cause.” They certainly deserve a helping hand by way of additional interest, which can make their life’s struggle a little smoother without any feeling of obligation towards the giver. The RBI should, therefore, certainly consider this proposal and instruct banks to offer additional rate of interest to the less-privileged; namely disabled, physically and mentally challenged individuals to help them to meet their day-to-day needs. 

But are the banks willing to bear this additional burden? India’s first disability census 2001 report brings out the fact that two out of every hundred Indians suffer from some form of mental or physical disability. That means that there are approximately 22 million (i.e.2.2 crore) physically and mentally challenged people in our country and this forms about 2% of our population. However, there are no statistics available as to the amount of deposits placed with banks by these people to assess the impact on banks if such a move to offer higher rate of interest to this class of people is implemented. How do you lighten the burden on banks, if they are willing to consider this proposal?

According to Section 135 of the Companies Bill, 2011, presently under the consideration of the Parliament, every company having a net worth of Rs500 crore or turnover of Rs1,000 crore shall make every endeavour to ensure that the company spends in every financial year at least 2% of the average net profit of the company made during the three immediately preceding financial year in pursuance of its corporate social responsibility policy (CSR). Though the Companies Act is not applicable to the public sector banks due to their incorporation through separate statutes, they are expected to comply with this part of the CSR like any other company. 

As per the statistics released by RBI, all commercial banks together made a net profit of over Rs70,000 crore during the year 2010-11 and 2% of this amounts to Rs1,400 crore per year, which should be more than adequate to meet the obligation of additional interest payable to this special class of depositors by all the banks put together, if the proposal is implemented. Besides, if the RBI abolishes the present practice of giving better rates on a single deposit of Rs15 lakh and above, it would save a considerable amount and add to their kitty to pay higher rate to these disabled people, who deserve it more than the rich depositors.

It is to meet this statutory obligation that all the banks could consider this additional payment of interest to disabled/physically challenged individuals and identifiable charitable organization who promote their cause, as a part of their CSR by including this objective in its CSR policy. And the ministry of corporate affairs, too, should consider this as redemption of their CSR obligation under the new Companies Act when it becomes law. The ministry should, therefore, include this objective under permitted activities in CSR policies listed in Schedule VII to the proposed Companies Act.

All things considered, this is an ideal opportunity for the banking sector to express its solidarity with the disabled people of our country. In fact this will be a blessing in disguise for the banking institutions as well, because more often than not, considerable money spent on social projects is knocked off by the intermediaries and do not reach the right beneficiaries, resulting in frittering away precious resources in the name of corporate social responsibility. But if the banks are allowed to give additional interest to this class of depositors and treat such additional payments under CSR obligations, banks will get the satisfaction of having disbursed the amount to the right people for a right cause.

Will the RBI take the initiative to consider this proposal of permitting the banks to offer a minimum of 1% of additional interest over and above the normal rate of interest on all types of deposit accounts to the disabled/physically and mentally challenged individuals and also to the identified charitable organizations who promote their cause, as a token of our concern to these less privileged members of our society? Apart from permitting this additional benefit to them, the RBI should come out with clear-cut guidelines to enable the banks to identify such customers to ensure that the benefit of this move goes to the right beneficiaries. As this scheme is a socially desirable, nationally important and functionally easy to operate, the RBI should persuade the banks to take up this project with a missionary zeal by giving enough publicity to attract the attention of the people at large.  

In the present context of a gloomy state of affairs pervading in our country with rampant corruption in every walk of life, scams galore in every aspect of political scene, land grabbing and illegal mining becoming a way of life and female foeticide  being order of the day, this proposal of offering additional interest to the most deserving members of our society when put in place will be a refreshing change, coming as it does from a staid financial institution like the RBI will be a breath of fresh air that will stir the conscience of our people to elevate our society to a new orbit of egalitarianism for the greater good of our country.   

(The author is a banking analyst and he writes for Moneylife under the pen-name ‘Gurpur’)