Some private banks are allegedly using corporate social responsibility (CSR) funds to provide facilities to district councils, municipal corporations and municipalities in an effort to attract crores of rupees in deposits, according to a complaint filed with the Reserve Bank of India by Maharashtra State Cooperative Bank administrator Vidyadhar Anaskar.
The complaint seeks a detailed RBI inquiry into whether air conditioners, vehicles, computers, furniture and other office facilities provided to local self-government institutions were genuine public-interest CSR initiatives or indirect commercial incentives linked to deposits. The allegations have not been independently established in the report, and no response from the banks or the RBI has been cited.
According to the complaint, some private banks have provided various forms of assistance to local authorities under the CSR framework. Anaskar has alleged that the underlying purpose of at least some such assistance may not have been social welfare, but the subsequent mobilisation of large deposits from the institutions receiving the facilities.
CSR spending is governed by Section 135 of the Companies Act, 2013, along with the applicable CSR rules. The complaint argues that if facilities are provided with an expectation that the recipient local body will shift or place deposits with the bank, the expenditure could raise questions about compliance with the law and the intended public-interest purpose of CSR spending.
Anaskar has asked the RBI to obtain details of assistance provided by private banks to local authorities and examine the deposits held by those institutions before and after the assistance was provided. The complaint also seeks an inquiry into cases where deposits were suddenly transferred to another bank and whether any indirect inducement or commission was involved in such transactions.
Deposits held by district councils, municipal corporations and municipalities represent public money. Decisions on where these funds are kept can affect the financial management of local bodies, including the safety of deposits, service quality and the transparency of the process used to select banks. The complaint contends that such decisions should not be influenced by additional facilities supplied by a bank.
The issue also brings cooperative banks into the dispute. Anaskar has argued that cooperative banks generally operate through member participation, interest rates and customer service, while they do not have comparable CSR resources to offer local institutions additional equipment or facilities. According to the complaint, this could create an uneven competitive environment between cooperative and private banks.
The complaint has asked the RBI to investigate the legality of the CSR expenditure, compare deposit levels before and after the assistance, identify the reasons for transfers of local-body deposits and examine whether any indirect incentives were offered. The source report does not state whether the RBI has begun an inquiry or whether any bank has been asked to respond.
