Oppose Proposed Merger of Public Sector Banks

C P Krishnan

THE Bank Employees Federation of India has opposed the proposed merger of three public sector banks, saying the move was anti-people and pro-corporate.

On September 17, the central government proposed merger of three public sector banks -- Bank of Baroda, Dena Bank and Vijaya Bank.  The Boards of the three banks immediately obliged by recommending their merger/amalgamation. The merger or consolidation of banks has been one of the main agendas of all the governments at the Centre since the release of the Narasimham Committee-I recommendations in this direction more than 25 years ago. The committee proposed “three to four big banks including SBI to be developed as international banks; eight to ten banks having nationwide presence to concentrate on the national and universal banking services”. At the same time, it proposed dilution of government holding in public sector banks (PSBs) from 100 per cent to 51 per cent with a solemn assurance from the government that henceforth “there won't be any nationalisation of private and foreign banks”.

In 1998, the Second Narasimham Committee proposed further reduction of government holding in PSBs to 33 per cent.  Successive governments have been trying to implement these recommendations one after another.  They were partially successful despite stiff resistance from the bank employees’ movement.  Legislation has been enacted in Parliament to reduce government holding in PSBs to 51 per cent in the early 1990s. The BJP-led NDA dispensation made a serious attempt to reduce government holding in PSBs to 33 per cent, thereby privatising them through an enactment in Parliament in 2000.  This could not succeed due to the resolute opposition of the bank employees and officers through continuous struggles which included several days’ strike supported by the Left and democratic forces of the country.

Even though there was no case for the private sector banks to exist as they continued to serve only a small elite section with increased charges, they were not nationalised because of the government’s solemn assurance in terms of the recommendations of the Narasimham Committee-I. Rather 10 private banks, including ICICI and HDFC, were allowed entry in early 1990s; two more -- Kotak Mahindra Bank and Yes Bank -- in early 2000s; and now under the present BJP regime more than 20 private banks, including Bandhan, IDFC, Airtel, Reliance, Equitas, Jana and Paytm, are allowed to operate.

While consolidation/contraction is the prescription for PSBs, more number and expansion are the “mantra” for private banks.  As we all know “merger would lead to closure of branches, manpower redundancy and drastic reduction of services to the ordinary customers”. In order to compete with BRIC nations, we need 40 branches per 1 lakh adults from the present position of seven branches.  But mergers will further reduce branch network. “The bigger the size of the bank, the lesser will be the credit to economically poor sections” has been the experience of various nations. Already 56 per cent of the total credit is extended to large borrowers with the credit exposure of five crores and above who account for 88 per cent of non-performing assets (NPAs).  Now creating bigger banks would only accelerate this phenomenon which will endanger the public money.

After merger of state sector banks with State Bank of India, hundreds of administrative offices and thousands of branches have been closed.  Several thousand employees and officers have been rendered redundant. Thousands of crores of rupees have been levied as fine from the ordinary customers in the name of not maintaining minimum balance, duplicate pass book, signature verification, etc.  Huge write off of corporate NPAs was resorted to. Now SBI chooses to increase the number of High Networth Individual (HNI) customers from 35,000 to 2 lakhs by setting up special branches for them to “help their wealth management”. All these things indicate a clear departure from mass banking to class banking.

Merger of PSBs is aimed to weaken PSBs in order to help the private banks which are in operation as well as those in the anvil. Airtel private bank flouted RBI norms by opening lakhs of accounts without the express consent and opening forms of the customers. No proper investigation has taken place against two top private sector bank executives even though there are very serious allegations against them. SBI has chosen to be a junior partner of the Reliance Payment Bank with conflict of interest. Perhaps as a quid pro quo the former SBI chief has been appointed as a director in the Reliance group.

The real problem of the industry is huge corporate NPAs and the unwillingness of the government to recover them.  The recent Insolvency and Bankruptcy Code law helps only to legalise large scale loot and plunder of public money in the name of “haircut”. The need of the hour is to stop this loot, recover the NPA from corporates stringently, strengthen the PSBs and drive towards mass banking.  For that, nationalisation of private banks and the expansion of PSBs are the real solutions and not merger of PSBs.  Rather merger of PSBs will be counter-productive in this regard.

Railway Mail Services have been dispensed with and postal services have been crippled to help private couriers, BSNL has been denied entry in the mobile services for two years, its infrastructure has been weakened and it has not yet been allowed to provide 4G services to its customers to help private players in telecom sector. Air India and Indian Airlines have been merged and weakened to facilitate the private players in the aviation sector. Now PSBs are attempted to be weakened through merger, huge piling up of NPAs, flawed lending policy and recovery policy, huge write-offs, etc. to promote private banks. Merger of public sector banks is a pro-corporate move. It is anti-people, anti-national, anti-employees and anti-officers. Therefore, let us oppose this sinister move of merger of PSBs resolutely with all the strength at our command. It is quite possible to defeat this nefarious design of the government as we have been successful in pushing back the Financial Resolution and Deposit Insurance (FRDI) Bill.

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