The Hindu Business Line : `Banks may explore pref shares option'

These pertain to know-your-client (a key ingredient of anti-money laundering norms), Basel II preparedness in view of the approaching deadline, payment and settlement system, and customer servicing, he said in an interview to Business Line. Excerpts:

Is the issue of preference shares really an option for banks at this juncture?

We are aware that the Government wants to take the proposal forward. It is expected to be brought up for consideration in Parliament during the coming winter session.

Incidentally, our chief legal advisor has been in touch with the Ministries of Finance and Law in this respect, and it is our belief that banks may well explore the possibility.

What is the payment and settlement system you are referring to?

We had earlier set up a group to consider a proposal to establish an umbrella organisation in this regard. This will relate to the operation of all retail payment and settlement systems in the country. The organisation will have an identity of its own.

We have been hearing about a fair practices code ...

Yes, we are talking about a code, under the guidance of what has been proposed to be named as the Banking Codes and Standard Board of India. The Reserve Bank of India had referred to this earlier. There is an example of this in the UK. It will be a registered body, complete with representation from the Government. Representatives of consumers will also be included. Even credit card related issues will be covered.

What are the IBA's latest views on bank consolidation?

While a number of reports have appeared on this issue, let me just say that we had earlier placed a report stating our position on the subject.

At the moment, that is where it stands; it is now up to the authorities to form a concrete opinion.

Besides savings bank rate, what else may be deregulated?

We have formed a group to study this aspect too. The rates in question are those relating to small loans up to Rs 2 lakh. The rate for savings bank deposits, incidentally, is 3.5 per cent.

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