All India Bank Officers’ Confederation (AIBOC), the apex organisation of bank officers in the country, is organising Bharat Yatras from different parts of the country, to mobilise public opinion against bank privatisation on the eve of the winter session of parliament. The Bharat Yatras will culminate at a “Bank Bachao, Desh Bachao” Rally in New Delhi on November 30th, 2021. Leaders of the farmer’s movement, trade unions, political parties and people’s organisations have been invited to the “Bank Bachao, Desh Bachao” Rally. While the general insurance act has already been amended in the monsoon session of parliament, it is widely anticipated that the Government will be introducing amendments to the Banking Companies (Acquisition and Transfer of Undertakings) Acts, 1970 and 1980 and the Banking Regulation Act, 1949 in order to pave the way for bank privatisation as announced by the Union Finance Minister in the Union Budget 2021.

Why Oppose Bank Privatisation?

Bank Privatisation will Weaken the Security of Bank Deposits: Individual bank deposits in India totalled around Rs. 87.6 lakh crore in March 2021. Of this, Rs. 60.7 lakh crore, i.e. around 70% were under the custody of the Public Sector Banks (PSBs). Clearly, Indian depositors prefer the safety and security of publicly owned banks. Bank privatisation would remove the sovereign guarantee behind the banks and make the deposits less safe and secure. The FRDI Bill which was tabled by the Union government in 2017, but later withdrawn because of public backlash, was also aimed at removing the sovereign guarantee behind the PSBs.

Bank Privatisation will Squeeze Credit Flow to Farmers, Small Businesses & Weaker Sections: Over 60% of the total credit to the priority sector; i.e. small and marginal farmers, non-corporate individual farmers, micro-enterprises, self-help groups and weaker sections like the SCs, STs and minorities; is provided by the 12 PSBs and the 43 Regional Rural Banks sponsored by them. Private and foreign banks have been meeting shortfalls in their 40% priority sector lending target in net bank credit by buying Priority Sector Lending Certificates from the PSBs and RRBs. Privatisation of PSBs would adversely impact credit flow to the priority sector.

Bank Privatisation will Exclude Poor & Rural Customers from Banking: Less than 3% of the 43.8 crore PM Jan Dhan Yojana accounts have been opened by the private sector banks to date. 31% of all PSB branches are in rural areas, while rural bank branches account for only around 20% of private sector branches. This is because private sector banks cater more to the affluent sections and disproportionately concentrate their resources in the metropolitan areas because of their narrow focus on profitability. Privatisation of PSBs will adversely impact financial inclusion.

Bank Privatisation will Bring Back Bank Failures: India did not have a single public sector bank during independence. Rather, there were over one thousand private and cooperative banks. Between 1947 and 1955, there were 361 cases of bank failures, with many depositors losing their life savings along with their faith in the banking system. That was a major reason why banks were nationalised in India. First, the SBI was created through the nationalisation of the Imperial Bank in 1955. Subsequently, 14 more commercial banks were nationalised in 1969 and 6 more in 1980, creating a state-dominated banking sector in the country.

With bank privatisation, the problems associated with the pre-nationalisation banking era, especially misallocation of bank credit and frequent bank failures will resurface. All the banks which have failed in recent times, namely the Yes Bank (2020) and Lakshmi Vilas Bank (2020), or the Global Trust Bank (2004) were private sector banks. Private sector NBFCs like the IL&FS and DHFL have also collapsed in recent times. In contrast, not a single PSB has failed till date.

Bank Privatisation will Weaken the Banking Sector & Reward Crony Capitalism: Annual bank credit growth in India has fallen over the past ten years. This slowdown in bank credit growth is mainly on account of the heavy financial losses suffered by the PSBs. Between 2011-12 and 2020-21, Rs. 29.5 lakh crore worth of Non-Performing Assets (NPAs) has accumulated in the banking system in total, with the PSBs accounting for Rs. 22.8 lakh crore, i.e. 77% of the total accretion of NPAs. Despite writing off Rs. 8.07 lakh crore worth of PSB’s NPAs between 2014-15 and 2020-21, the stock of NPAs with the PSBs still stood at over Rs. 6 lakh crore in end-June 2021.

The losses made by the PSBs are mainly contributed by the large corporate borrowers. Over 13% of all advances made by the PSBs to large borrowers have turned into NPAs. Moreover, cases of bank frauds have increased very sharply in recent years, with over Rs. 4 lakh crore worth of fraud cases detected between 2017-18 and 2020-21. The central government has failed to bring the perpetrators of the big-ticket loan frauds to book, like Vijaya Mallya, Nirav Modi, Mehul Choksi, Jatin Mehta, etc.

Privatisation of the PSBs would imply selling the banks to private corporates, many of whom have defaulted on loans from the PSBs. The growing NPAs and frauds in the private sector banks show that these occur independent of bank ownership. Far from offering any solution to the NPA problem, PSB privatisation will only reward crony capitalism.

Bank Privatisation will Shrink Employment Opportunities, Especially for SC/ST/OBCs: PSB mergers have already set in motion the process of employee retrenchment and bank branch closures. The total employee strength of the PSBs has fallen from 8.44 lakh in March 2018 to around 7.7 lakh in March 2021. The total number of PSB branches declined by 3321 between March 2017 and September 2021. PSB privatisation will accelerate these trends, which will shrink employment opportunities for the youth, particularly for the SC/ST/OBC sections, because, unlike the public sector, the private sector does not follow reservation policies for the weaker sections.

Privatisation of Public Sector Enterprises: Retrograde Policy: The government’s move to privatise banks is part of its policy of privatisation and ‘strategic disinvestment’ of almost all public sector enterprises. Since 1991, successive governments have sold government equities worth Rs. 5.30 lakh crore till date. Out of this, disinvestment and privatisation worth Rs. 3.75 lakh crore i.e. 70% of the total, were undertaken since 2014-15, under the present government’s tenure.

The ‘National Monetisation Pipeline’ developed by the NITI Aayog intends to sell off/lease public sector assets worth Rs. 6 lakh crore to private corporates in the next four financial years, from 2021-22 to 2024-25. The shortlisted assets include National Highways, Trains, Railway Stations, Power Generation and Transmission, Oil & Gas pipelines, Telecom infrastructure, Mines and Minerals, and others. This wholesale privatisation of infrastructure assets under the garb of ‘asset monetisation’ is accompanying the disinvestment and strategic sale of PSEs across several sectors. This disastrous path of selling family silver is against national interest.

The Report of the 15th Finance Commission (2021-26) noted that India’s general government revenue to GDP ratio at 17% is the second worst among the G 20 countries. Centre’s net tax revenue to GDP ratio fell from 7.3% in 2017-18 to 6.7% in 2019-20 and 6.9% in 2020-21. Besides the economic recession, the substantial cut in the corporate tax rate in September 2019 has contributed to falling in revenue mobilisation. The need for disinvestment of CPSEs would not have arisen, had the direct tax and other revenue mobilisation efforts of the government yielded results. The fact that the government is choosing the softer option of selling national assets rather than mobilising taxes from the rich and affluent sections of society, particularly the billionaires who have grown immensely wealthier through the stock market bubble, exposes its class bias.

Appeal to the People: We appeal to the people of India to rise up against the government’s retrograde policy of selling out our public sector enterprises, which form the backbone of our national economy. We appeal to the millions of small depositors of the PSBs, the farmers, MSMEs, Self-Help Groups, and loanees from the weaker sections of society, to rise up against bank privatisation, which will harm their interests. We appeal to all civil society organisations, farmers’ and workers’ unions, political parties, and other stakeholders of our democracy to join and support our movement in defence of the PSBs, and public sector enterprises in general. Together, we shall defeat the policies of privatisation.

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