INTRODUCTION
Banking services play a crucial role for the citizens of India as they form the backbone of the country’s financial system. It helps in supporting the economic growth in India. Utilization of banking services is one of the traditional methods used by the Indians. Banking Services mainly consist of a variety of services like investment options and providing loans, thus helping in building the structure of the economy. In recent years, banking services have helped in improving the availability of credit and other financial services to businesses and individuals. The banking sector in India has undergone significant reforms, which have made it more competitive and effective. The country’s expansion depends on the support of a good banking system.
In simple words, the services which are provided by Banks to their customers.[1] The services provided by Banks are opening Accounts, facilitating payment services, providing loans, providing investment services and lockers. Due to the tough competition provided by other Financial Institutions, banks are continuously striving hard to provide highly efficient services to Consumers. Originally, banks were opened for opening accounts, depositing and withdrawing money for customers, so that customers could keep their money and valuables safely. Now, banking services have increased to a great extent.
The economic growth of any country depends mainly on the banking sector. Strong and reliable banking services form the base upon which a civilized society is constructed. The banking sector is the backbone of global economies and it helps in building the future of our nation.
TYPES OF BANKING SERVICES:[2]
- Account Services: Banks provide different types of accounts to customers. The customers can open current, savings, fixed deposit, recurring deposit or Demat accounts. It also provides lockers so that the customers can keep their valuables in safe custody.[3]
- Payment Services: Banks facilitate many payment options to their customers like issuing chequebooks, debit cards and issuance of travel cheques providing an online banking platform for electronic fund transfer safely and securely.[4]
- Loans and Credit: Banks offers loans and credit services to their customers, eg. personal loan, housing loan and education loan. Also issuing credit cards to its customers for easy credit on buying goods and services on a day-to-day basis.[5]
- Investment Services: Nowadays, banks also provide other financial services like opening of Demat accounts, mutual funds and retirement planning.[6]
- Insurance Services: In addition to the above, banks also offer insurance services to their consumers, eg. For the safety of one’s life or for the safety of property, appropriate insurance is offered to consumers.[7]
Based on the needs of customers, banks provide different types of services to different consumers for their betterment. Banking services not only include traditional, but also modern services like ECS, RTGS, EFT, NEFT, ATM, tele banking, internet banking, mobile banking, etc.
TYPES OF CUSTOMERS:[8]
- Retail Customers: Customers who use banking services for their day-to-day needs like depositing, withdrawing, etc.
- Small Business Customers: Customers who have the requirement of small loans for business purposes. They need services like business loans, overdraft facilities, etc. to meet their operational requirements.
- Corporate Customers: Big Companies require huge funds for company expansion for building the infrastructure of the country and hence, they require bigger loans like cash management services, international banking and financial advisory services.
Banks are entrusted with the safety of the deposits of the consumers and they have to provide these services to the utmost satisfaction of the consumers.
Indian Bank Vs. Godhara Nagrik Co-operative Credit Society Limited and Another :[9]
The Defendants and their members were the consumers of Indian Bank. Through Commission Agents, cash was deposited for Fixed Deposits, but Nationalized banks do not allow this.
Loan applications against those Fixed Deposits were filed. A large number of Officials were involved and unofficial investments by them were made. When Fixed Deposits were produced at the time of maturity in the Bank, the Bank refused to pay the amount stating that the amount was repaid through loans availed by them.
In the Writ Petition, a Single Judge of the High Court held that due to the presence of factual disputes, no remedy could be provided to the Petitioners.
[10]The Single Judge was directed to constitute a Committee by the Deputy Governor of the Reserve Bank of India to investigate the matter. Various powers were delegated to the Committee and the decision of the Committee shall be final and binding upon the parties.
The Committee consisted of members from the following fields:
- One person as Chairman, Banking, Ombudsman from Mumbai
- As Member, Regional Director, RBI from Ahmedabad
- As Member, General Manager, Bank of Baroda OR
- As Member, General Manager, Indian Bank.
The total Committee consisted of three members. When the Committee dealt with cases of the Bank of Baroda and the Indian Bank, only the representatives of the Bank of Baroda and the Indian Bank acted as a member respectively.
Whereas the Chairman opined that depositors should get their amount refunded by the Banks, but the representatives of the respective Banks were facing the double payment issue in case of the refund of the amount. However, no unanimity could be reached by them.
Report submitted by the Committee found that there was fraud committed by the Bank Officers and the Committee could not give any direction in this regard.
The High Court opined that the Indian Bank should refund the disputed money to the Defendants, based on the report of the Committee
Thereafter, Petitioners filed a case in the Hon’ble Supreme Court. The Reserve Bank of India has statutory powers conferred under the Banking Regulation Act to initiate action against the Bank. The Reserve Bank of India could also have initiated an enquiry and taken action against the Bank and its employees.
The main question was that even though Bank Officials have conspired with the Commission Agents, still they can refuse to make payment.[11] Being the trustee of the investor’s money, Banks have the responsibility of paying back the money to the Respondent.
Another question was whether cooperative societies that had no role to play should suffer. The Defendants require funds for their daily needs and the amount invested should be paid at the time of maturity.
The Supreme Court awarded that the banks should be informed about the amount, the investors would have received at the time of the maturity, banks may invest such amount from their accounts and issue fresh Fixed Deposit Receipts. If a cooperative society intends to avail loan, Banks may give it on condition that the amount of Fixed Deposit would remain with them and a loan granted against that amount.
The Supreme Court directed that it should not be treated as precedent and orders issued were mainly due to hardships faced by the co-operative societies. The Apex Court also directed that the criminal cases pending in various courts should be disposed of immediately.
CONCLUSION:
The Banking sector is coming up with new services each day, to compete with the other Financial Institutions. The majority of the people in India have a sentiment to deposit their money in the Banks due to its safety and reliability feature. While banks play a crucial role in economic growth, they need to improve consumer satisfaction, take strict action against misconduct, and amend rules to avoid scams. Overall, the Indian banking sector is well-positioned to support economic growth in the years to come. By providing a variety of financial services to businesses and individuals, banks can help to boost investment, savings, and consumption. This can lead to higher economic growth and job creation.
Author(s) Name: Sunita Jagdish Ahuja
References:
[1]‘Importance of the Banking Sector in India’ (March 27 2023) <https://ipbindia.com/banking-sector-in-india-importance/#:~:text=The%20banking%20sector%20provides%20financial,to%20help%20their%20businesses%20grow.> accessed on 24 October 2023
[2] ‘Importance of the Banking Sector in India’ (March 27 2023) <https://ipbindia.com/banking-sector-in-india-importance/#:~:text=The%20banking%20sector%20provides%20financial,to%20help%20their%20businesses%20grow.> accessed on 24 October 2023
[3] Ibid
[4] Ibid
[5] Ibid
[6] Ibid
[7] Ibid
[8] A K Mandilwar, ‘Types of Customers’ <https://bankingdigests.com/wp-content/uploads/2020/04/Types-of-customers.pdf> accessed on 24 October 2023
[9] S.Sinha, ‘Indian Bank v Nagrik Godhara Nagrik Co-op. Credit Society Ltd. & Other’ (16 May 2008) <https://indiankanoon.org/doc/1670355> accessed 23 September 2023
[10] S.Sinha, ‘Indian Bank v Nagrik Godhara Nagrik Co-op. Credit Society Ltd. & Other’ (16 May 2008) <https://indiankanoon.org/doc/1670355> accessed 23 September 2023
[11] S.Sinha, ‘Indian Bank v Nagrik Godhara Nagrik Co-op. Credit Society Ltd. & Other’ (16 May 2008) <https://indiankanoon.org/doc/1670355> accessed 23 September 2023
