RBI cautions small financial banks on FDs

MUMBAI: RBI deputy governor Swaminathan J has sounded a word of caution for small finance banks (SFBs).
Swaminathan has asked the boards of these banks to assess whether there is overdependence on high-cost term deposits or bulk deposits from a limited number of institutions from the point of long-term stability. The deputy governor also cautioned against charging high interest rates and levying usurious fees on borrowers.
Speaking at a conference last week, Swaminathan said that the expectation behind licencing of SFBs was that they would play a crucial role in driving inclusive growth by extending financial services to the underserved, fostering entrepreneurship, and supporting economic progress.To achieve this the SFBs should leverage technological innovations like the Unified Lending Interface for efficient and cost effective delivery, he said.
“It is disheartening to come across egregious practices by some SFBs, such as charging excessive interest rates, collecting instalments in advance as well as not adjusting such advance collections against loan outstanding, levying of usurious fees, etc. It is also observed that grievance redressal mechanism is far from adequate in most SFBs,” said Swaminathan.