Union Finance Minister Nirmala Sitharaman on March 26 delivered a humorous response to Aam Aadmi Party (AAP) Rajya Sabha MP Raghav Chadha, who had raised concerns about the conditions of banks in Parliament.
In a lighthearted exchange during her speech in the Rajya Sabha, Sitharaman remarked that Chadha's exposure to the Western world would benefit people in India.
"I was quite amused, sir, and I hope Member Raghav Chadha doesn’t take offense. He pointed out the number of fans in the bank, the state of the banks, and how many were whitewashed instead of painted. I am really, so, so satisfied. It's good to know that some Members of Parliament, despite their busy international engagements, have found time to visit rural banks and notice details like the lack of fans, doors, and chairs," the Finance Minister said.
She continued, "Raghav Chadha, please do more of this. It will help people within the country, as your exposure, especially to the Western world, can bring about great improvements here. Please continue your efforts."
Chadha was seen smiling as the Finance Minister gave her response to his speech. Earlier, the Aam Aadmi Party (AAP) MP expressed deep concern over the severe crises affecting the country's banking system. During the discussion on the Banking Laws (Amendment) Bill, 2024 in the Rajya Sabha, he questioned the central government's intentions, stating that the bill does not meet public expectations.
He criticized it as a bill focused only on procedural reforms, failing to address the real issues that citizens face daily.
He emphasized that banks are not just financial institutions but the foundation of democracy.
"From common people's savings to farmers' loans, from students' education to retirees' pensions - the banking system is deeply integrated into every citizen's life. However, growing banking fraud, loan recovery issues, and increasing pressure on employees have resulted in declining public trust in banks. Today, people are hesitant to trust banks with their money," he said.
Raghav Chadha pointed out that home loan rates in the country have surged to 8.5 percent - 9 percent, while education loans range from 8.5 percent to 13 percent. "As a result, owning a home has become unaffordable for young individuals, and education is becoming excessively expensive, pushing students into debt before they even start earning. Additionally, MSME loan rates have reached 11 percent, making it harder for small businesses to grow," he said.
He urged the government to set a maximum limit on education and home loan interest rates. First-time homebuyers should receive subsidized interest rates for affordable housing. He also suggested that the RBI should promote small and digital banks to help lower interest rates.
MP Raghav Chadha also voiced the concerns of senior citizens, highlighting the declining interest rates on savings and fixed deposits. He pointed out that FD rates stand at 6.5 percent while inflation is 7 percent, meaning savings are losing value over time. The Public Provident Fund (PPF) rate has dropped to 7.1 percent, affecting long-term financial security.
He recommended that retired individuals and small depositors should receive a minimum 8 percent interest rate to protect their savings from inflation.
On Banking Laws (Amendment) Bill
During the discussion on the Banking Laws (Amendment) Bill, 2024, Chadha warned that without a robust banking system, the entire framework of savings and credit would collapse. Millions of poor individuals, farmers, women, and youth--who rely on banks for their basic financial needs--would be left out of essential government schemes.
Expressing deep concern, he stated, "If banks didn't exist, where would a farmer, who sacrifices meals and sells milk from his cattle, save for his children's education? How would a small employee gather emergency funds for tough times?"
Chadha also raised alarms over the rising threats in digital banking. He revealed that 36,075 banking fraud cases were reported in FY 2024, with digital payments and loan fraud being the most common. Cyber fraud caused losses amounting to Rs 2,054.6 crore in FY 2024, while UPI fraud increased by 85 percent that year.
He questioned why public sector banks (PSBs) report the highest number of fraud cases, eroding people's confidence in the banking system. He recommended that banks should allocate at least 10 percent of their IT budgets to cybersecurity and implement mandatory biometric authentication for high-value transactions.
Discussing the issue of frauds related to KYC (Know Your Customer) updates, Raghav Chadha said, "People receive a call, and in the blink of an eye, their accounts are emptied." Fraudsters trick people into sharing their bank details under the guise of updating KYC, leading to massive financial losses. Reports indicate that 70 percent of banking frauds occur after KYC updates, as this is when security monitoring is weakest.
He questioned why banks' security measures are still inadequate and demanded stronger safeguards to protect customers' money.
MP Raghav Chadha expressed concern over Non-Banking Financial Companies (NBFCs), increasing Non-Performing Assets (NPAs), slow loan recovery, and the impact of bank mergers. He warned that weak regulations, as seen in the IL&FS crisis, could destabilize the financial system.
He urged the government to strengthen debt recovery tribunals and implement AI-based credit scoring to prevent bad loans. Additionally, he suggested that the RBI should cap ATM withdrawal charges and basic banking fees to protect customers from excessive costs. He criticized the closure of over 3,000 bank branches in 2022-23, most of which were in rural areas. This has forced villagers to travel long distances to withdraw money, often paying Rs 20-Rs 23 per ATM transaction, which is a heavy burden on the poor.
Chadha also raised concerns over the rising dependence on credit cards, which is pushing the middle class into financial distress. He remarked, "People see credit cards as a convenience, but they unknowingly fall into a debt trap." In a sharp remark, he said, "Credit cards provide relief, but high-interest rates crush the middle class."
He urged the government to promote financial literacy regarding credit card usage and ensure banks follow responsible lending practices to prevent consumers from falling into unmanageable debt.
