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A suggestion of a product to increase liquidity in banks

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It is well known that all banks baring private ones always insist for capital infusion by Government which passes negative results on public as Government always conveys banks to raise capital on their own. 

Due to above, don’t you think that in other words, banks convey that their management is not competitive enough to garner sufficient profit to run the bank under their management effectively?

In view of all this I opine that first banks should design innovative products and thereafter market aggressively using all forums to lure customers.

As all of you will believe that nowadays unless banks make attractive offers, no customer will turn up as the saying goes, “Nothing ventured, nothing gained”. Hence to lure customers from the ongoing competition, banks will also have to plan in such a way which can force all prospective customers to participate in their products.

To make them self-reliant, the government should also relax the restrictions imposed on its behalf so that the dependence of banks on the government can be reduced.

One more fact has been observed that fixed deposits are decreasing in banks, so it is necessary that banks provide additional facilities to lure the customers.

After considering all discussed above, it is also a fact that banks will have to bear additional expenses for providing additional facilities. That’s why there is a need for such a product which can provide a win win feeling to both i.e. to customers as well as to the bank after absorbing the burden of increased expenses.

Now I suggest one product which is not new but can be introduced by making it attractive from all angles.

I strongly believe that if this product is promoted and implemented properly, then it is possible to garner thousands crores as long term fixed deposits.

Now my suggestion about the product is as follows –

1) Fixed deposit of 10000/ – should be mandatory for this product and deposit facility in multiples of 1000/- can be given.

2) A zero balance savings account and a loan account will automatically be opened as soon as the term deposit account starts.

3) At the time of fixed deposit, complete KYC will cover all these three accounts.

4) The mortgage over the loan account will automatically get generated against fixed deposit and its limit will vary from minimum 90% to 95% maximum of the fixed deposit amount which in turn provide an upper hand to bank management.

5) Now zero balance savings account will have to be offered under this facility to the depositor who in turn use it like his ordinary savings account. That means any type of dividend, pension, salary, etc. can be deposited directly in the savings account and withdrawal from this should be similar to general SB a/c.

6) Arrange to issue savings account cheque Book as per RBI rules.

7) Similarly, Debit ATM card should not only be issued free of cost, but also keep it free from annual fees. The rest conditions will remain same as in ordinary SB a/c i.e. as per RBI rules.

8) SMS facility will be provided free of cost

9) Whenever a customer issues a cheque for payment which is excess than SB balance then that will absorb first SB balance and thereafter remaining amount will be utilised out of overdraft limit

10) Whenever any amount gets deposited in a savings account then after utilising OD balance rest will appear as SB balance

11) As regards interest, SB a/c gets credit of same as per savings account rules and FD will be dealt as per agreed terms subject to RBI rules.

12) OD interest will be calculated on product basis @1% or 2% more than FD interest and the same will be debited to SB a/c every month 

The above are some major minimum points besides banks are free to frame out few more to have transparency as there is still a lot of space in the above proposal. 

It is well known that all banks baring private ones always insist for capital infusion by Government which passes negative results on public as Government always conveys banks to raise capital on their own. 

Due to above, don’t you think that in other words, banks convey that their management is not competitive enough to garner sufficient profit to run the bank under their management effectively?

In view of all this I opine that first banks should design innovative products and thereafter market aggressively using all forums to lure customers.

As all of you will believe that nowadays unless banks make attractive offers, no customer will turn up as the saying goes, “Nothing ventured, nothing gained”. Hence to lure customers from the ongoing competition, banks will also have to plan in such a way which can force all prospective customers to participate in their products.

To make them self-reliant, the government should also relax the restrictions imposed on its behalf so that the dependence of banks on the government can be reduced.

One more fact has been observed that fixed deposits are decreasing in banks, so it is necessary that banks provide additional facilities to lure the customers.

After considering all discussed above, it is also a fact that banks will have to bear additional expenses for providing additional facilities. That’s why there is a need for such a product which can provide a win win feeling to both i.e. to customers as well as to the bank after absorbing the burden of increased expenses.

Now I suggest one product which is not new but can be introduced by making it attractive from all angles.

I strongly believe that if this product is promoted and implemented properly, then it is possible to garner thousands crores as long term fixed deposits.

Now my suggestion about the product is as follows –

1) Fixed deposit of 10000/ – should be mandatory for this product and deposit facility in multiples of 1000/- can be given.

2) A zero balance savings account and a loan account will automatically be opened as soon as the term deposit account starts.

3) At the time of fixed deposit, complete KYC will cover all these three accounts.

4) The mortgage over the loan account will automatically get generated against fixed deposit and its limit will vary from minimum 90% to 95% maximum of the fixed deposit amount which in turn provide an upper hand to bank management.

5) Now zero balance savings account will have to be offered under this facility to the depositor who in turn use it like his ordinary savings account. That means any type of dividend, pension, salary, etc. can be deposited directly in the savings account and withdrawal from this should be similar to general SB a/c.

6) Arrange to issue savings account cheque Book as per RBI rules.

7) Similarly, Debit ATM card should not only be issued free of cost, but also keep it free from annual fees. The rest conditions will remain same as in ordinary SB a/c i.e. as per RBI rules.

8) SMS facility will be provided free of cost

9) Whenever a customer issues a cheque for payment which is excess than SB balance then that will absorb first SB balance and thereafter remaining amount will be utilised out of overdraft limit

10) Whenever any amount gets deposited in a savings account then after utilising OD balance rest will appear as SB balance

11) As regards interest, SB a/c gets credit of same as per savings account rules and FD will be dealt as per agreed terms subject to RBI rules.

12) OD interest will be calculated on product basis @1% or 2% more than FD interest and the same will be debited to SB a/c every month 

The above are some major minimum points besides banks are free to frame out few more to have transparency as there is still a lot of space in the above proposal. 

Nut shell is above to have an edge over other competitors then only more customers will be added and more nos. are always remain beneficial. It is expected that not only bankers (including RBI) but also bank customers will also think deeply on the above product in a changed environment so that the dependence of banks on the government can be reduced.

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