July 25, 2021

Banks Under Vigorous Threat

Niladri Sen

THE reason behind the merger and acquisition of nationalised banks in our country is now clear. It is another surrender to the corporate demands for disinvestment of nationalised banks in India. A meeting was held recently under the chairmanship of the cabinet secretary of central government- a high-power committee. This committee is constituted comprising secretaries of economic affairs, tax, expenditure and corporate affairs, law and also the secretaries of department of public enterprises, department of investment and public asset management; to accept the proposals of NITI Aayog for privatisation of nationalised banks.

They are preparing for the next step to submit the names of the banks before the group of ministers of the Modi government for the final approval for disinvestment. They have ignored the demands and views of United Forum of Bank Unions (UFBU) a centralised organisation of about a hundred per cent bank employees and officers in the country.

The merger of nationalised banks had been announced first by Nirmala Sitaraman, Finance Minister on August 30, 2019. It came into effect on April 1, 2020, through the merger of Indian Bank with Allahabad Bank; United Bank of India and Oriental Bank of Commerce with Punjab National Bank; Syndicate Bank with Canara Bank and; Corporation Bank and Andhra Bank with Union Bank. Previously in April 2017, in the first term of the Modi government the merger of five associate banks – State Bank of Bikaner and Jaipur, State Bank of Patiala, State Bank of Hyderabad, State Bank of Travancore and State Bank of Mysore and the Nationalised Women’s Bank with State Bank of India had been made effective in the country. Then in the second term of the Modi government, merger of Dena Bank with Vijaya Bank had come into effect on April 1, 2019. In 2020, 10 banks were merged into four. The total number of nationalised banks in our country in the year 2014 when the Modi government first came into power was 26. Now the number is 12 after these mergers. The decreased figure is now going to be handed over to the corporate sectors, national or global soon.

Two banks, Central Bank of India and Indian Overseas Bank are being handed over for disinvestment. The RBI is also taking part in the privatisation process actively. It has targeted to collect Rs 1.75 lakh crore through direct sale of public sector units in our country out of which the larger portion one lakh crore rupees is to be collected by disinvestment of nationalised banks.

The corporates in our country have been demanding privatisation of the banking sector. A charter of demands was placed before the first Modi government by the ‘Confederation of Indian Industries(CII) in the year 2017 demanding that the government share in nationalised banks be lowered to 33 per cent; to hold 50 per cent share if necessary by the government in State Bank of India alone, not others.

The big corporates are eager for the privatisation of nationalised banks. Why? Because the main challenge before all the nationalised banks in our country has been the huge amount of unrecovered loans from the corporates due to the pro-corporate policy of the Modi government. Loans of poor farmers or small entrepreneurs in our country are seldom exempted. But huge amounts of unrecovered loans which is known as non-performing assets (NPA) have been exempted in an unexpected way by violating the nation’s financial regulations. Big loan defaulters earn super-profits from their business and are fully able to repay the loan from the nationalised banks. But the Modi government’s policy for the adulation of corporates encourages them for ignoring the repayment of loans and weakening the nationalised banks.

Statistics show that the NPA of nationalised banks up to 2021 ran into lakhs of crores. The larger portion of it has been due to non-repayment by the giant corporates. No criminal case has been filed against them. An amount of Rs 8.07 lakh crore was written off by the Modi government in the period 2014-21. An amount of Rs 6,32,000 crore has been written off from 12 nationalised banks and collected only Rs 19,207 crore in the last eight years. The first name in the defaulter's list is of Mehul Choksi, a diamond merchant. He owes Rs 8,000 crore unrecovered loan from PNB. According to an RTI reply from the RBI thousands of crores of rupees of 50 defaulters have been written off.

Since the nationalisation of banks in 1969, there has been a steady operating profit. However, due to Modi’s policies of benefitting cronies large NPAs were accumulated and then written off thus forcing the banks into a loss. We may take an example. The net operating profit of the nationalised banks for the financial year 2019-20 is Rs 1,74,336 crore. But they have been forced by the Modi government to spend Rs 2,00,353 crore for the NPA.

About 60 per cent total assets in our banking system have been under the custody of the nationalised banks at present. The amount of the total number of deposits is about Rs 127,00,000 crore of which two-thirds is under the control of the nationalised banks. More than 80 per cent of these deposits are kept by small depositors. The efforts of corporates are to use this money for their profits. It has been strongly realised by the capitalists in our country today that after funding the current ruling party at the centre, it is high time to fulfil their class interests. It is learnt that the Bank Nationalisation Act, 1969 and Banking Companies (Acquisition and transfer of the undertakings) Act, 1970 would be amended in favour of the demands of disinvestment of the nationalised banks by the corporate lobby which surely endanger the life of bank employees, officers and also insecure the deposits of common people and reduce the employment.