The Drawbacks Of Indigenous Bankers In India

For this very reason, the indigenous bankers spread across India carried out their functions according to their own convenience

. Their focus was more on their profit making activities. They focused less on providing services which would be highly beneficial to the borrowers. Given below are the commonly noticed drawbacks of indigenous bankers:

1) Most of the indigenous bankers exploit the general public who borrow funds from them. Since they have no systematic ways of maintaining accounts providing their borrowers with necessary information, the indigenous bankers take much advantage of their customers. They indulge in various types of mal practices and since there is no legal proof, they often get away with it without the slightest trace. The borrowers are the ones who often fall prey to such mal practices.

The indigenous bankers sometimes make unauthorized deductions from the loan amounts which are borrowed. This happens mainly because there is no higher power to keep a tab on the workings of the indigenous banks and bankers. Another way in which indigenous bankers indulge in unauthorized activities is by overstating the loan amount in the documents. Also, when the borrowers pay back the money which they owe, the indigenous bankers don't provide them with receipts to prove their payments.

2) There is absolutely no control of the reserve bank over indigenous bankers; this happens to be one of the main drawbacks of the indigenous bankers. Since the reserve bank of India has no control over the indigenous bankers, there is no higher authority to regulate the activities carried out by them. This is a major obstacle in the way of creating a stable and organized money market in India. The fact that they have no one to regulate their activities leads them to carry out various activities which work in their favour and not in the favour of their customers.

3) It took several years to build up a proper bill market in India. The indigenous bankers in the country are a major discouragement to the bill market. They very often grant loans and advances to their customers without providing them with bills. They stand in the way of India"s aim of developing a proper bill market.

4) Indigenous bankers maintain secrecy of their accounts; they keep secrecy not only about their accounts but also about their activities. They neither get their accounts audited by a professional nor get the annual balance sheets published for the public to see. This is a drawback since it raises many questions in the minds of the public. Also, the fact that indigenous bankers maintain secrecy of their accounts reduces the public"s confidence in them.

by: Harsha Maitra

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