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Privatisation of PSU banks will affect financial inclusion

Public sector Bank employees had observed a one day strike on 29th July for protesting against the proposed merger of associate banks with SBI and banking reforms announced by the government. The united Forum of Banks Unions (UFBU), an umbrella organization of nine bank employees and officers unions representing 8 lakh staffers had marched ahead with the strike. The bandh involved employees and officers of public sector banks, old generation private banks and foreign banks totaling more than 80,000 branches.

The Associate Bank Officers’ Association in a communiqué has rightly alleged that the Government must address the main issue of non-performing assets and its recovery and avoid upon privatization of public sector banks. Approximately 4,000 bank employees abstained from work. The banking industry in India witnessed sea-change through nationalization of banks in the years 1969 and 1980 with the sole aim of promoting small savings for self-sufficiency and for utilizing the banks as catalytic agents for economic growth.

The UFBU comprising nine trade unions of bank employees and officers (AIBEA, AIBOC, NCBE, AIBOA, BEFI, INBEF, INBOC, NOBW, NOBO) opposed the move to merge State Bank of Mysore, State Bank of Bikaner and Jaipur, State Bank of Travancore, State Bank of Hyderabad, and State Bank of Patiala with State Bank of India and other nationalized banks as the merger would result in reducing staff size and number of branches of associate banks in the name of rationalisation of operations.

Trade unions belonging to all state-run banks in the past, has acted as a powerful corrective force against the excesses by bank managements. One cannot ignore the fact that these unions continue to be a formidable force in nationalized banks. During last seven decades bank employees had fought many battles – but have not lost any of them. Their strength is their unity among rank and file supporting the strike call. No doubt, the merger exercise has already been set in motion and it is reckoned to be a matter of time before the process is completed, the employees are making a last-ditch effort to stall it.

Public sector banks have an important role to play in the nation’s development. The current management of most PSBs is at par with those of private banks. In fact, it is the level of NPAs which to a great extent differentiate between a good and bad bank. In fact high level of NPAs in Indian banks is nothing but a reflection of the state of health of the industry and trade.

Comparing the performance of PSBs and private sector banks at a time when the former is weighed down by problems faced by nation’s economy at large is unjustified. It would be more appropriate to compare performance over a longer period of time. Privatization of banks will worsen the banking sector in the country. It is terrible that the Indian banking industry, considered to be one of the strongest in the world is now grappling with rising NPAs because of willful defaulters and political pressure. It is unfair to blame banks for lending huge amounts to Vijay Mallya despite his business incurring losses. Political interference in decision-making of public sector banks is the root cause of the NPA mess. As far as publishing the list of defaulters is concerned, bringing such details under the purview of the Right to Information Act is a more viable option. A wide range of academic studies points to a trend towards convergence in the performance of PSBs and private banks since banking sector reforms were set in motion in 1993-‘94.

The functioning of PSU banks has been criticized by those who want complete privatization of these institutions. No doubt privatization of banks will lead to the profit driven approach for short time but will it be possible to implement financial inclusion and other Government schemes which is one of the top agenda of RBI?

Vinod Chandrashekhar Dixit

(The views expressed by the author in the article are his/her own.)

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