New Delhi: Stop the annual salary increment of managers at state-owned banks which have failed to meet the loan target under the central government’s Mudra (Pradhan Mantri Mudra Yojana) scheme.
This is what Hansraj Ahir, Union minister of state for home affairs, has written in a letter to the district magistrate of his constituency. The scheme was begun in 2015, to give unsecured loans of up to Rs 1 million to small enterprises, with the objective of boosting self-employment.
Bankers and staff unions have been complaining of being overburdened on the variety of government schemes to be implemented. This latest advice from a minister has caused more vexation.
In a letter to the district collector of Chandrapur (Maharashtra) on June 6 (titled ‘strict action against banks not co-operating in disbursing Mudra loans’), Ahir has highlighted some concerns in this regard. “Send a recommendation to senior (management) to stop the salary hike of those branch managers whose branches have had poor implementation,” the letter, written in Marathi, stated.
The rate of interest of loans under Mudra is relatively low. A borrower is not required to submit collateral to a bank in taking the loan. The government has set an ambitious target for banks to disburse loans worth Rs 3 trillion to small entrepreneurs in 2018-19. When asked, Ahir said under the ambit of the District Development Coordination and Monitoring Committee, or DISHA, a minister or public representative may take action against a public representative if implementation of government programmes is found to be poor.
“Action needs to be taken against those banks that are showing poor performance in implementing government programmes, especially those of crop loans and small loans under Mudra,” Ahir told Business Standard.
The DISHA committee, which replaced the earlier District Vigilance and Monitoring Committee, have provisions that allow it to monitor government programmes, facilitate their implementation, recommend follow-up action if irregularities are found, refer matters to enquiry or suggest suitable action. The guidelines cover all non-statutory schemes of the government and have a suggestive list that, however, does not include Mudra.
As a follow-up, Ahir said he’d found Punjab National Bank (PNB) was not disbursing crop loans in Chandrapur district and had a poor record on Mudra loans. So, he had decided to move the funds allocated to him under the Members of Parliament Local Area Development Scheme, which he can spend in his constituency, from PNB to Bank of India.
“PNB did not lend crop loans to farmers at all this season, which is why I decided not to use its services for parking official funds,” he said. Adding: “As people’s representative, I can recommend action which is important in the public interest to the DISHA committee and the district administration remains answerable to me.”
Though no such directive for stopping the annual salary hike of branch managers was sent to banks, the then DM of Chandrapur, Ashutosh Salil, said he had issued a letter to the chief executives of all banks in the region. It asked them to effectively implement government schemes and penalise those who underperform.
“We asked the banks to maintain a register and record all applications under Mudra, with its status – whether rejected or processed. This is important, as we do not have that record at present. We want banks to be more responsive to the need of entrepreneurs and poor farmers,” Salil said.
Bankers said public representatives could hold banks accountable for non-performance but not stop pay increments.
“All banks have their OSR, or Officers’ Service Regulations, which have rules pertaining to penalisation of officers for non-performance,” said a public sector banker. Day to day operations are commercial and independent of political interference, the banker added.
Trade unions said they took strong objection to the minister’s missive. “The United Forum of Bank Unions took strong objection to such high-handed instructions and decided to take up the matter with the government to rescind these,” it said after a review meeting last month.
By arrangement with Business Standard.