SBI’s ‘Monthly Average balance’ : A Tool To Penalise Poor For Being Poor

    SBI’s ‘Monthly Average balance’ : A Tool  To Penalise Poor For Being Poor
A financial crisis in running in India Due to High NPA, Bad loans etc.So Government , RBI and other financial institutions are taking major steps to recapitalize the economy . State Bank Of India has reviewed its service charges, which is in effect from date 1st April 2017. It has increased service charges for different services. The most significant point is, it has reintroduced the penalty for not maintaining ‘Monthly Average Balance’ requirement, after a gap of five years.
According to State Bank Of India, Failure to maintain monthly average balance in saving/current accounts will lead to penalty upto RS 100/- + GST.
This charge varies on the basis of nature of area and amount of shortfall. In Metro cities Minimum Account Balance requirement is RS 5000/-, while, in urban and semi urban areas Minimum Account Balance requirement is RS 3000/- and RS 2000/- respectively. And in Rural Area Minimum Account Balance requirement is Rs 1000/-.

Below is charge for not maintaining monthly average balance for current account holders

Source: State Bank of India website

Charge for not maintaining monthly average balance for saving bank account holders.

Source: State Bank of India website.

In its  service charge table  State Bank Of India has written that Reserve Bank Of India Has permitted it. Actually in RBI notification dated November 20, 2014 with title ‘’levy of penal  charges on non maintenance of minimum balance in savings account” RBI has described the rules to implement minimum balance requirement according to this notification levy of charges for non maintenance of minimum balance in savings bank account shall be subject to the following additional guidelines. According to RBI notification dated November 20,2014.
(i) “In the event of a default in maintenance of minimum balance/average minimum balance as agreed to between the bank and customer, the bank should notify the customer clearly by SMS/ email/ letter etc. that in the event of the minimum balance not being restored in the account within a month from the date of notice, penal charges will be applicable.”
(ii) “In case the minimum balance is not restored within a reasonable period, which shall not be less than one month from the date of notice of shortfall, penal charges may be recovered under intimation to the account holder.”
(iii) “The policy on penal charges to be so levied demay be decided with the approval of Board of the bank.”
(iv) “The penal charges should be directly proportionate to the extent of shortfall observed. In other words, the charges should be a fixed percentage levied on the amount of difference between the actual balance maintained and the minimum balance as agreed upon at the time of opening of account. A suitable slab structure for recovery of charges may be finalized.”
(v) “It should be ensured that such penal charges are reasonable and not out of line with the average cost of providing the services.”
(vi) “It should be ensured that the balance in the savings account does not turn into negative balance solely on account of levy of charges for non-maintenance of minimum balance.”

Incidence of monthly average balance
The incidence of monthly average balance is on normal saving accounts and current accounts

Exempted Accounts
Pradhan Mantri Jan Dhan Yojana account, financial inclusion account ,basic Savings Bank deposit account,  Pehla Kadam and Pehli Udaan account - up to age group of 18 ( primary account holders),
And pensioners of all categories including recipient of social welfare benefits are also exempted.

History
Monthly average balance was working till 2012. For State Bank Of India saving accounts, before 2012 has to maintain at least Rs 1000/- failing to which led to a non maintenance charge of Rs 225/- per month.
It was abolished by State Bank Of India  in 2012 for the purpose of attract new customers.

Aim of SBI to implement monthly average balance.
According to Rajnish Kumar, managing director of State Bank Of India , they are trying to cover some of operational cost like linking account number to Aadhar card is a expensive work and they have invested a large amount in technology.
But State Bank Of India  is mainly trying to cover the losses due to NPA and Merger of banks.
Revenue Generated by monthly average balance charge.
According to a RTI query, state bank of India realized 235.06 crore as penalty till June end from 388.74 lakh accounts. SBI is assuming to earn Rs 2000/- crore from monthly average balance charge, in financial year 2017-18.

Role of NPA in loss of SBI

NPA  means non performing assets.
For banks whatever banks give out as a loan to people is termed as asset, that is Principal plus interest.
In terms of bank NPA are the amount that someone don't pay by a particular installment for a continuous period of 90 days  then it is called as NPA.
NPA has three categories
  1. Sub standard assets
  2. Doubtful assets
  3. Loss assets
RBI definition of NPA: An asset including a leased asset become non performing when it ceases to generate income for bank. SBI’s gross NPA ratio has risen significantly to 6.90 % in 2016-17.
State Bank Of India Net NPA ratio has also Rises significantly from 2.12% in 2014 15 to 3.71% in 2016-17.
Source: SBI Annual Report 2016-17.


actually this NPA  raised due to loan given by State Bank Of India  to big corporates like Mallya, Jaypee Group etc. They got loans from banks but they are not able to repay, so Bank like State Bank Of India  are in pressure to cover the NPA.
State Bank Of India  wrote off loans owned by wilful defaulters in November 2016 worth 7016 crore including loans of Mallya , Surya pharmaceuticals etc.
So the money which State Bank Of India  is wrote off is like a loss to SBI.
Merger of associate banks.
According to a statement of Arundhati Bhattacharya, the chairperson of state Bank Of India , merger of associate banks and Bharatiya Mahila Bank costed around 3000 crore.
And in an article by R Krishnamurthy financial year 2016-17 was a bad Year for all associate banks. Their collective Loss of 2016-17 was 11865 crore. More than profit earned by State Bank Of India. Also NPA of associate banks is quite high.





Source:SBI analyst presentation Quarterly results Q1FY18

Handling of Pradhan Mantri Jan Dhan Yojana account

In Pradhan Mantri Jan Dhan Yojana till 20 September 2017 a total of 24.43 crore of account was opened by public sector banks and it beer at total deposit up 528 74.07 crore rupees according to the data it has an average up 2164. 3 rupees per account and most of the money is deposited after demonetization. Since there is less money in Pradhan Mantri Jan Dhan Yojana accounts ,so State Bank Of India  can lend less money and will earn less interest .Handling charges of these accounts are quite same as other accounts. So the Bank earns very less profit or in some cases loss with Pradhan Mantri Jan Dhan Yojana accounts.

Linking of account with Aadhaar number

According to Rajnish Kumar, managing director, of State Bank Of India, government has ordered Bank to link account number with Aadhaar number by the 31st December 2017. There is 40 crore savings account linking of Aadhaar number is a very costly process

Most of people has already holding accounts so there is few number of people who don't have account they don't have account because of their lack of interest in it so the aim of abolishing I'm a minimum average balance in 2012 to get new customers is almost satisfied.

How SBI can raise money for lending
State Bank of India is relatively running in losses there is three ways for SBI to get money to lend  if Government and RBI don't intervene
  1. State Bank of India own capital
  2. Borrowed money
  3. Money from customers.

To lend money from SBI’s  own capital  Since SBI capital is already low then the requirement for SBI can't land more money through its capital.

Borrowed money
If State Bank of India borrows money then it has to repay to its lenders with interest.

So if it doesn't get bailout package from government Reserve Bank of India it has only way to arrange money is from its customers.

SBI decided to extract revenue from its customers.
SBI is imposing certain restrictions on its customers. These restrictions are ,
1. number of times one can submit withdraw money from his account
2. Number of ATM transactions allowed
3. DD Commission. etc

Conclusion
So State Bank of India has risen  its service charge to extract money from its customers.
Thus, State Bank in Bank of India is using the way which will affect its middle class and poor class customers .By implementing monthly average balance State Bank of India is charging its poor customers for being poor. State Bank of India is trying to cover it's losses done by corporate borrowers   like Vijay Mallya and JP Group by extracting money from poor in the form of monthly average balance and other service charges.

State Bank of India is repeatedly saying that if minimum balance is not kept in account they are unable to recover cost of maintaining the accounts.
But previously banks required to maintain 2 ledger books for each separate account per year but now they have moved to digital platforms so the cost of maintaining digital ledger  book is very low because it takes very less space in hard disc of computer so it is clear that the cost of handling ledger is currently lower than previous years .Actually they are trying to cover the charges occurred by non performing assets merger of associate banks and Bharatiya Mahila Bank etc from charging poors .

Role of GST in giving pain to poors
Before 1st July, if an account falls under non maintenance of Monthly Average Balance then it has to pay penal charge( Decided by bank)+ service tax. Then services were taxed at rate of 15%(consolidated). But from 1st july after implementation of GST banking services are tax under 18% tax rate. Hence GST increased a burden of 3% on such a account that falls under non maintenance of monthly average balance criteria.




UPDATE
After receiving feedback from customers on monthly average balance State Bank of India lowered minimum balance requirement to 3000 rupees per account in Metro areas .
Earlier it was 5000 rupees per account . SBI also revised downward charges for not keeping the said balance.
It will be applicable from October 2017. SBI exempted accounts of minors, pensioners, and beneficiaries of social benefit scheme from monthly average balance .Penalty for  not maintaining monthly average balance is also revised ranging 20 to 50%among all groups and categories the range of charge will be Rs 20 to 40 for semi urban and rural centre and for Metro and urban centres it will be Rs of 30 To Rs 50.

References

  1. SBI hikes minimum balance to Rs 5,000 for savings account in metros(2017,April 3), Livemint. Retrieved from www.livemint.com

  2. After 5 years Karma SBI to change for breach of minimum balance from April (2017, March 5),Thehindubusinessline. Retrieved from www.thehindubusinessline.com
  3. SBI to penalise account holders for non maintenance of minimum balance from today : 5 things you need to know(2017, April 1), Indian Express. Retrieved from www.indianexpress.com.
  4. Levy of panel charges on non maintenance of minimum balance in savings bank accounts (2017, November 20), Reserve Bank of India. Retrieved from www.rbi.org.in
  5. SBI lowers minimum balance requirement to Rs 3000/-, cuts penalties(2017, September 25), livemint. Retrieved from www.livemint.com
  6. SBI waives minimum balance for saving accounts (2012, July 04), The Hindu. Retrieved from www.thehindu.com
  7. SBI reviewing minimum balance for saving account (2017, September 17), The Hindu Business Line. Retrieved from www.thehindubusinessline.com
  8. SBI annual report 2016-17
  9. SBI reportedly writes off bad loans of Rs 7016 crore, Congress Raise Up issue in Parliament (2016, November 16), business standard. Retrieved from www.business-standard.com
  10. Merger of SBI associate banks to cost Rs 3000 crore:  Bhattacharya(2016,may 28), business standard. Retrieved from www.business-standard.com
  11. Krishnamurthy,R(2017, July 22),”public sector bank Merger”, economics and political weekly,vol 52 , issues no. 29
Read More

Top 10 Things You Need To Know In Economics

Here are the top 10 things you need to know in economics:By Balaji Viswanathan.

  1. Economics has two main streams - Microeconomics and Macroeconomics. Micro deals with customer behavior, incentives, pricing, margins, etc. Macro deals with broad economies and larger things such as interest rates, Gross Domestic Product (GDP) and other  stuff you see in the business column of a newspaper. Micro is more useful for the managers and macro is more used by investors. Except for points 2 & 3, I will cover macroeconomics in other points.
  2. Law of Supply & Demand: This is the founding block of economics. Whenever supply of something increases its price decreases and whenever supply decreases price increases. Thus, when you have excess production of corn, food prices decrease and vice versa. Think of this intuitively. You will find its applications in 1000s of places. 
  3. Marginal Utility: Whenever you have more of something its use for you diminishes. Thus, a $100 would be more valuable when you earn $1000/month than when you earn $1 million/month. This is widely used in setting up prices.
    ​
    ​
     
  4. Gross Domestic Product (GDP): This is the fundamental measure of the size of an economy. This is conceptually equal to the sum of incomes of all people in the country or sum of the market value of all goods & services produced in that country. Right now US is the biggest economy in terms of GDP at around $14 trillion. That means, $14 trillion of value is produced in the US every year.
  5. Growth rate: The growth of an economy is commonly measured in terms of GDP growth rate. Since GDP is a measure of national income, this growth rate is a rough proxy for how an average person's income grows every year. 
  6. Inflation: You already know that the price of most products now are higher than in your grandfather's time. Inflation (measured in percent) is measure of how much a bunch of products have increased in price from last year. In mature economies, annual inflation is around 2% - that means on an average the prices of stuff goes up by 2% every year. The fundamental role of central banks is to manage this rate and keep it to a low positive number. Here are  the 100 year inflation numbers in the US.
    ​
    ​
  7. Interest Rates: When you loan money to somebody, you expect something extra in return. This excess is called the interest. Interest rate is a positive number that measures how much excess you will get. There are bunch of rates here. In the short term, this rate is usually set by the Central Banks. Right now it is close to zero. In the long term, this is set by the market and is dependent on inflation and the long term prospects of the economy. The mechanisms in which the central banks control the short term rates is called monetary policy.
  8. Interest Rates vs. Inflation vs. growth: There exists almost an inverse relationship between interest rates & growth and interest rates also can affect inflation directly. Thus, when you increase interest rates inflation tend to come down, along with growth. One is good and other is bad. Thus, the constant tension on setting the interest rates. In the US, Federal Reserve sets the short term rates making it one of the most watched economic news.
  9. Fiscal Policy: Government can control the economy in a big way by adjusting its expenditure. The group of mechanisms using expenditure form the fiscal policy.When government spends more it can lead to more demand and that means more price increase. This means both high growth and high inflation. And it works in the reverse too. Thus, governments try to spend more during periods of low growth & low inflation and cut spending during periods of high growth & high inflation.
  10. Business cycle: Economies have their periods of booms and bust in cycles of approximately 7 years long. At the start of the cycle it is a boom, then it gets to the top, then there is a contraction leading to a recession (period of negative growth and/or increasing unemployment) and finally followed up with an expansion.
    ​
    ​

Bonus:
1. Opportunity Cost: When you do an activity, you tend to equate how good the activity is when compared to the alternatives. For instance, when you are working hard a Friday night on a project, you might be thinking "man, I should be doing something else." The alternative (in this case, partying with friends) has a high value, and thus your present project better be attractive. This value of the alternative is termed as an "opportunity cost" - value of what you give up. Thus, if you quit a $120K/year paying job to do a startup, your opportunity cost of doing startup is $120K/year. Your payoff should be higher than what you give up. Hat tip: Charles Phan

2. Comparative Advantage:  You are running your tech startup and one day a client asks you whether you can build a website for them. Should you offer to build the website for them, or should you pass up the opportunity to a friend? How do you decide? A rational person might calculate how much time they will take to build the website, and whether they can use that time to earn more building their current startup product. Then, he/she might calculate whether the friend might be able to build the site more efficiently. 

If the friend can build it more efficiently and you have a lot in your plate, you will pass up the opportunity. This is called the theory of comparative advantage. Your friend has an advantage here and it makes no sense for you to take up that business. Nations, businesses and people should do only those things they are better at and leave the rest to others
Read More

How does it feel to have a girlfriend in JNV?

Writer Ajeet Chaubey
I am from JNV Garhwa, Jharkhad.
First let's start with How does it feel to have a GF
(If you really in love with her):
1. Your entire behavior comes on a right track. Your communication skill, dressing sense etc. will automatically become good.
2. You will take care of not just yours prestige, but you have to take care of her too. Thus, It increases your perfection that you can’t do any mistake at any cost at any point of time.
3. Feeling of responsibility.
4. Feeling of 1 +1 =11 not just 2.
5. You will first time, to concentrate on some things that you don't know really about.
Like for me the taste of different chocolates like KitKat, DiaryMilk get changed and I got switched from unhealthy chewing gums to healthier chocolates.
You will come to know teddy bear can be more precious than you for someone. (Just a jock Dear!).
6. Your academics performance got boosted, provided both of you are classmates. (As we were class mates and both of us did very well at our school JNV Garhwa, Jharkhand).
7. At JNV or in any boarding schools/colleges students are always in shortage of food items, If you have a GF then you and your friends need not to worry about food items at any time.
(When we were in 12th in 2010 at our school, she has given me packets of mixture and sonpapri at 2 AM. In JNV it is an immense crime, All JNVian knows it. But each and everything are okay in love.)
8. You will have a lot of sisters at JNV, if you have a GF. (I don't know, why?).
On the day of Raksha-Bandhan you wouldn't have time and space in stomach to have lunch. As I have more than 12 sisters over there and 1 sweet from each is more than enough.
For my girl friend it is a plus point that she has 12 (including junior, seniors and classmates) loyal friends, who used to call her Bhabhi.
9. If your teachers (who loves you) know about your relationship then it’s awesome. They will take care of your relationship.
But but but….
Who don't loves you and got this news then you will be get suspended or even expelled, As we were suspended for 15 days.
Those, 15 days were like a hell for me at that point of time, because you can’t face your family even you haven't did any mistake.
For a girl it is nothing but a nightmare in middle class society where we live. My GF went through it but how she bounced back on the track was really outstanding.
This entire episode made us enough BOLD to do very good in our life. During this we have find some very good friends and mentors (Teachers) of life.
10. After JNV days, you will in contact with a lot of JNV friends and they feel more comfortable to be in contact with you than a single guy at JNV because he/she has two ways to be connected with you.
11. You will learn a lot from her.
JNV is best place to live and learn each and every aspects of life. The life at JNV is a prototype of what you are going to face after 7 years.
So, above all are true for your question brother. Thanks for asking this question.

Credits: Ajeet Chaubey (Quoran)
Read More

Once A Navodayan Always A Navodayan

I would better not be judgemental over this ... But I would just try to list few pros and cons and few events that occur in JNVs. I leave judgement part to you.
1. You won't have exposure to competitive environment but you will see students working hard to get better at what they are. You will never be sure about who will top the exams. It's fun how things change at every end of the year.
2. You will be deprived of digital world. But it is a good thing considering that you don't have to waste hours and hours on Facebook and other social networking sites. But You get to use internet and computer in school hours i.e. Sufficient time for what you want to find.
3. Best thing you get is special connection with teachers. Every night you can discuss your doubts with House masters.
4.What else can be more wonderful than to be with your friends 24 hours.
5.Once a Navodayan,always a Navodayan. You will never find students so possessive about their school.
6. You have various activities running every Saturday like singing,dancing,speech competition,drama etc etc.
7.You will learn 3 languages.You won't be surprised to see a guy/girl from Chhatiagarh speaking Gujarati fluently if you are in Navodaya.
8.Silly but important. I know songs in Punjabi,Tamil,Odia,Bengali and Gujarati. Pretty handy when you want to befriend guys from other states.
9. You will not have a stage fear after giving speech no. of times in 3 different languages. All you have to do is grab a chance when you have one.
10. Sports clusters and music clusters. No school in India gives chance to reach nationals in just few levels. Cluster,Regional and National.This point needs a lot of elaboration and I am not the right guy :)
You visit so many other JNV schools during this period at the same time new friends in every school you visit.
11.Lab facilities from class 6th for simple experiments.
12. Live quiz in front of whole school is a show you will never get to attend in other school.
13. House Cleaning competition teaches you cleanliness.Quite a show it is...including gardening.
14. Only bad thing is not everybody gets coaching for IIT exams unless you clear Dakshana exam after class 10.
There is so much to tell bro but I think this provides enough information for you to compare it with other schools. Sorry this is not well versed,wrote all this in hurry :)
Read More

Most famous food items in Jawahar Navodaya Vidyalaya(JNV)

JNV MESS
How do you decide what was famous among all those variety. I can think of a few reasonable ways, like Queue, Rush ,  general sentiment, Bragging and number of Seconds/Doubles ( "Double Marna" was a thing of pride) which might have made me believe something was more famous.

Seconds: Mess workers were instructed strictly not to let anyone have seconds for most food items. We had an expert non bribe-able Rampal Bhaiya famous for catching Doublers (Double marne wale) .  
But that never stopped anyone from trying, we are talking about Navodaya here.
Challenge makes it more fun. We take pride in doing the "Impossible".

So after a heavy breakfast or heavier meal when people retire to their classroom or dorm you get to hear people bragging like, I took 3 doubles, or I got pass Rampal Bhaiya and he didn't even suspect anything.

And that is how we know what People like -the Bragging, the thing people bragged most about was definitely poori. others include Non-veg , evening Snacks, sweet.

and yeah Special Tea made for teachers. it was like rare Tricky little forbidden thing everyone wanted a sip of,  The trick was very simple, to sit near teachers table and wait for them to be out of sight and then toot paro. taste was worth all the trouble. not to mention bragging rights you get off of this.

Queue/Rush:  Sometimes the Production speed was less then consumption, and it used  to happen mostly for famous items on the list specially on special occasions, this was further factored  by people taking doubles. most of us would generally rush and wait only for Poori or nonveg . ( this was the only thing I stood in line for  after I was promoted from Half Pant to Full Pant category in 8th std)

General Sentiments : 
 Almost everyone seemed to like Poori chola, Poha, Fried rice, Pulao Chola, Halwa, most evening snacks ( including Parle-G, was it just in my JNV's menu? )


JNV MESS 
What is so Special About Poori:

After everyone is beaten up by hard physical work like  Gardening(juniors) or micromanaging(seniors) on a Freaking Sunday  morning, the mob is hungry and no one should ask them to wait,

Everyone had a bad Saturday dinner already and they are eagerly waiting for this rounded little oily thing, you are asking them to wait, not fair but they will stand on the queue sometime for hours.

and after all the waiting and fighting in queue when you get your hands on those hot Poori with Chola, and you eat with a mob of hungry friends sitting around you. what is not to love.

I think this could be the reason for Poori being the  most famous food.
Read More

Jawahar Navodaya Vidyalaya: What are the good ways to skip morning PET ?

KHO-KHO AT JNV BASTI
I wish I knew answer to this question at very early days of Navodaya. But it is not as hard as you think (well, you will say the same after you leave the school) .

But its the luxury that class X and +2 students enjoy in the name of board exams(they dont have to attend morning drill from december to March.) I hated it till I reached class X.
Let me mention few ways
-Get a medical slip from the medical rep which says you cant run or do yoga. How?? You need fake your injury or show some fake medical certificate from outside which you can get it for free..
-Make your house leader your best friend (my option) and he ll always say you are sick during morning drill. Problem solved.
-Just dont care. Yes, even I never considered this as an option but I saw a very good example, there used to be a guy who never cared for thia drill he was punished so many times but he dint change. Then our PT teacher stopped caring about him.

Having said all this I would recommend not to miss the morning drill, even though you have no interest in whatever you are forced to do. It is helping you in lot many ways. People outside are paying heavily to learn what you are trying to avoid. I know you will stop doing all these as soon as you come out of school. But mark my words, one day you will start doing it again. This time no one forcing you.
Being friends with house leader is the simplest option, while counting the no of students in drill, he will always add one. 

One more way is if the PT teacher is taking attendance in the beginning, it would be easier for you to skip the drill after attendance in dark (even sun is lazy to show up early in winter, so take this advantage)

Also, don't forget to hide under bed if you heard PT checking the dormitories.


Read More
Subscribe to: Posts (Atom)