question_answer

Direction: Read the passage carefully and answer the questions given below it. Certain words and phrases arc given in bold to help you locate them while answering some of the questions.

Why do Indian banks get such kid-gloves treatment from stakeholders? The Government, well aware of the role played by bankers in creating the mountain of NPAs, has been shrinking away from hard decisions such as privatizing the worst-performing banks or denying capital to them. The RB1, despite grumbling periodically about banks not passing on rate cuts and 'lazy' banking, has been loam to penalize individual banks for such infractions.

Depositors, despite constantly being taken for granted on service quality, costs and interest rates, continue to rely overwhelmingly on banks to park their savings. India's largest bank has just trimmed its interest rate from 4 per cent to 3.5 per cent on its savings accounts, citing high 'real returns'. That's conveniently forgetting that depositors have gamely accepted negative real returns on their savings accounts for much of the last decade!

In fact, the real reason why the Government and the RBI give banks a long rope is that they are such large custodians of public money. RBI data on household savings tells us that bank deposits grabbed 42 per cent (Rs.6.2 lakh crore) of the Rs.14.9 lakh crore of incremental financial assets added by Indian households in FY16. That was nearly twelve times the assets that went into small savings schemes, six times the money added to shares and mutual funds, and three times the assets salted away in pension and provident funds. As of July 2017, Indian banks sat on a mammoth Rs.106 lakh crore in demand and time deposits, over 60 per cent of which belongs to ordinary households. Clearly, with this kind of public money in its coffers, the fortunes of the banking system are closely intertwined with consumer and investor confidence. That's why both the Government and the RBI are so wary of doing anything that can cause even the faintest of tremors in the banking system. But with banks now facing a problem of plenty and actually looking to disincentives depositors, the time is just right to cut this Gordian knot. The Government should seize this opportunity to open up alternative savings avenues to retail folk, so that they are no longer over- dependent on banks. Savings schemes run by India Post at one time offered a popular alternative to banks. But a steady reduction in tax benefits, sharp cuts in interest rates and creaking service infrastructure have decimated their popularity with retail savers in recent years. Therefore, despite the unparalleled distribution reach of the post office network, small savings manage less than a tenth of the assets cornered by banks.

With 1.4 lakh branches that reach deep into the rural hinterland, India Post can emerge as the preferred custodian of savings for low-income earners in India's smaller cities and towns. To induce these savers to consider it, the schemes will need some tweaks. Their features need to be greatly simplified. The current practice of subjecting small savings schemes to quarterly interest rate resets based on prevailing market yields is terrible. Instead, it would be best if the Centre moved back to fixed-rate regime on these schemes, with a constant mark-up over long-term inflation rates. Resets in the small savings rates should be effected only when there are significant structural changes in inflation rates. The Centre must also waive income tax on the interest from the post office savings account. A monetary ceiling on individual investments in each scheme can ensure that affluent savers don't reap undue benefits. The quality of customer experience that the small savings desks of India Post deliver also needs to be vastly improved. Disinterested staffers and ill-equipped agents need to be replaced. With India Post already on an ambitious project to overhaul and computerize its branches, this isn't such a tall order.

 

What has the attitude of the Government been in view of the increasing NPAs of banks?    '

(A) It has shied away from taking any hard decision even against worst-performing banks.

(B) It has continued all types of support to banks.

(C) It has listed worst-performing banks and decided to merge them with better-performing ones.

A)  All (A), (B) and (C)       

B)  Only (A) and (B)

C)         Only (B) and (C)

D)         Only (A) and (C)

E)  Only (C)