MP Criticises Banking Laws Amendment Bill as Inadequate; Calls for Interest Rate Cap and Cybersecurity Boost
New Delhi, March 27 — Aam Aadmi Party (AAP) Rajya Sabha MP Raghav Chadha has raised strong concerns about the declining trust in India’s banking system, blaming it on the surge in fraud cases, high interest rates on loans, and insufficient financial security for depositors.Speaking during the discussion on the Banking Laws (Amendment) Bill, 2024, in the Rajya Sabha on Wednesday, Chadha dismissed the legislation as a mere procedural reform, claiming it overlooks the core issues affecting everyday citizens.
Parliament Passes Bill Allowing Multiple Nominees
The Bill, which allows bank account holders to nominate up to four individuals, was passed by a voice vote in the Rajya Sabha. It had earlier cleared the Lok Sabha in December 2024.While supporting reforms to nominee provisions, Chadha argued that the Bill fails to address broader issues plaguing India’s banking ecosystem.
‘Banks Are Pillars of Democracy’: Chadha
According to an official statement by AAP, Chadha said that banks are not merely financial institutions but the pillars of democracy, deeply integrated into the lives of citizens.However, he warned that escalating banking frauds, high loan rates, and shrinking savings returns are pushing people away from formal banking.
Home and Education Loans Becoming Unaffordable
Chadha cited the current home loan interest rates of 8.5–9% and education loan rates ranging from 8.5% to 13%, describing them as barriers to affordable housing and higher education.He said, "These high rates are pushing youth into debt traps before they even start earning." He urged the government to cap interest rates and offer subsidised loans to first-time homebuyers.
Savings Lose Value Against Inflation
The MP also pointed out that fixed deposit (FD) interest rates stand at 6.5%, falling below the 7% inflation rate, resulting in erosion of savings value."Retired individuals and small depositors should receive a minimum 8% interest rate to safeguard their savings," Chadha said.
Alarming Rise in Banking Frauds
Chadha highlighted that over 36,000 banking fraud cases were reported in 2024 alone. He emphasised a significant rise in digital payment and loan-related fraud, with cyber fraud accounting for losses worth ₹2,054.6 crore and UPI fraud increasing by 85%.Public sector banks reportedly witnessed the highest number of fraud incidents, he said, which further damages public trust.
He recommended that banks allocate at least 10% of their IT budgets to cybersecurity and adopt biometric authentication for high-value transactions.
KYC Fraud, Hidden Charges, and Rural Branch Closures
Chadha raised red flags over frauds during KYC updates, alleging that 70% of frauds happen after such updates. "A single phone call is enough to drain people’s accounts," he remarked.
He also criticised the closure of over 3,000 bank branches in 2022–23, mostly in rural areas, forcing villagers to travel long distances for basic banking services.
Additionally, he alleged that Indian consumers are being burdened with hidden banking charges worth ₹7,500 crore annually, including ATM fees, account maintenance charges, and penalties for not maintaining minimum balances. He called on the RBI to regulate these charges and ensure quicker complaint resolution.
Growing Credit Card Debt and Staff Pressure
Chadha warned that rising credit card debt is pushing the middle class into distress, while loan recovery pressures are taking a toll on banking employees. He urged the government to:- Promote financial literacy
- Regulate loan recovery practices
- Improve working conditions for banking staff
A Call for Real Reforms
Chadha concluded with a stark warning: unless substantial reforms are undertaken, public confidence in India’s banking system will continue to decline, threatening the financial stability of millions of citizens.
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