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Sunday, March 16, 2014

West Bengal’s savings scheme for poor in limbo as SBI demands higher fees

West Bengal chief minister Mamata Banerjee's flagship savings scheme for the state's poor depositors is yet to gain momentum with State Bank of India, the country's largest bank, demanding a higher fee for services. The plan is aimed at protecting the poor from falling prey to pyramid schemes such as those offered by the now-defunct Saradha Group.

The state has invited banks to take part in the programme to act as a payment gateway, but only United Bank of India has signed up thus far. State-owned SBI wants Rs 63 for every transaction but that's not acceptable to West Bengal Infrastructure Development Finance Corporation, the agency implementing the scheme, said people aware of the developments.

United Bank, coincidentally struggling with a mountain of bad debt, gets Rs 25 per transaction. "We are neither confirming nor denying it," SBI chief general manager Sunil Srivastava said when asked for comment. A senior WBIDFC official said the scheme would not be viable if banks charge more than Rs 25 per transaction. Both SBI and WBIDFC are still negotiating the rate.

State finance department officials have asked SBI chairman Arundhati Bhattacharya to look into the issue, sources said. The state's wholly owned subsidiary launched the safe savings scheme, or 3S, in November last year to offer an alternative investment avenue to small depositors and protect them from being deceived by the spuriously high returns offered by pyramid schemes.

Saradha went bust last year affecting 17-lakh depositors who had deposited an estimatedRs 2,000-3,000 crore expecting their money to multiply. WBIDFC, a non-banking company registered with the Reserve Bank of India, has engaged 30,000 agents to mobilise deposits. Depositors are supposed to visit a designated bank's branch and open nofrills accounts with minimum customer identification formalities.

At the same time, the depositors will submit a request to the bank to transfer the amount to WBIDFC. WBIDFC has mobilised about Rs 2 crore so far of the Rs 250 crore it needs to make the scheme viable, officials said. Depositors are paid 9 per cent-9.25 per cent interest on their money.

The scheme also has a financial inclusion angle — it aims to improve banking access in the state, where branches cater to nearly 14,000 people each on average against RBI's prescribed limit of 10,000.

Kolkata-based Allahabad Bank and Uco Bank refused to participate in the plan. However, several other banks have shown interest in joining the savings scheme to boost fee income from a state where loan growth remains modest in the absence of large industries.

Source: Economic Times


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