Facts and Consequences of Privatization of Public Banks
Nine unions representing officials and employees of public sector banks called for a two-day nationwide strike to protest the privatization of state-owned banks, and on March 15 and 16, there was a nationwide bank strike. The strike was called by the United Forum of Bank Unions, the country's largest bank employees union, and includes nine unions of bank employees and officials. The government is emphasizing on merger and privatization of banks. The union has opposed the government's announcement of privatization of two other banks, including IDBI, as part of the decision to privatize almost all state-owned banks.
The strike was called in protest against the government's decision to privatize. Around 10 lakh employees participated in the strike. Which includes the country's largest bank SBI. Around one million workers from across the country and about fifty thousand people from Maharashtra participated in the strike.
It is important to know what these communicators have to say? The government has announced the privatization of IDBI and two public sector banks in the budget. In the process, the government is turning the wheel of history and once again handing over Rs 90 lakh crore of savings to Indian banks to large corporations, which have spent lakhs of crores of rupees on these public sector banks. In the form of bad debts. The government is now ready to hand over the entire banking system to Asha's hands. On this
The government argues that these banks often have to provide capital by allocating it in the budget, but if those banks bear the loss, the capital runs out. Bank accounts are at a loss due to bad debts. If the government had taken drastic steps to help banks recover these bad debts, then no public sector bank would need a single penny from the government by allocating capital in the budget. Till now, the government has not begged the recovery authorities, surface notices etc. for recovery of arrears. Subsequently, the government was arguing that if the bankruptcy law comes, see how quickly the arrears would be recovered. But now it has become clear that these heavily indebted lenders have got rid of their bad debts by waiving loans of millions of crores of rupees to banks on the basis of insolvency law. It is the responsibility of the government to establish an effective legal mechanism for recovery of arrears. But to cover up that failure, the government is trying to privatize banks by blaming them and making them inefficient. One million bank employees and officers went on a two-day nationwide strike in protest against the government's policy. It consisted of 100 percent employees and officers of nationalized banks, old-time private banks, foreign banks, rural banks. On the day of the strike, workers organized dharna programs in front of bank branches wherever possible and distributed leaflets stating their role from house to house where the corona epidemic was not possible. Unions say the government is moving in the opposite direction when it needs to boost the economy by strengthening state-owned banks.
The role of the union is that if these public sector banks are privatized, a handful of large industries will benefit from this. However, the common man will be thrown out of the banking circle. These private banks operate solely and exclusively for profit. This will lead to neglect of agriculture, employment generation, small scale industries, businesses. Banking will shrink in rural and backward areas. The participation of private banks in the Jan Dhan Yojana is very impressive. These private banks only handle 3% of the fuel accounts. So at whose door do ordinary people want to go? And this argument of the employees is quite correct. For this it is necessary to first understand the background behind the nationalization of banks.
Nationalization of banks
On 19 July 1969, the Indira Gandhi government nationalized 14 large private banks. Banks were accused of not fulfilling their social responsibility of developing all levels of the country and being a puppet in the hands of the owners and the rich. This decision is considered to be the beginning of nationalization of banks. However, earlier, in 1955, the government took over the management of the State Bank of India. Then in 1980 Morarji Desai's Janata Party government nationalized 6 more banks. After 52 years of bank nationalization, the current government is now trying to reverse this cycle. Because it's completely wrong
Prior to nationalization, banks were forced to open branches in rural India, mainly in urban areas. However, due to this, branch expansion and business of all banks increased rapidly and the banks reached all the people. For the first time, banking services were made available to the general public, which was really needed. All economic reforms and schemes of the central and state governments are implemented only through banks. This is because the reliability and efficiency of banks are always more dynamic, quick and transparent than in government offices. As the posts of clerks in government banks are also filled through highly qualified and competitive examinations, their capacity is higher and the officers are of intellectual rank of IAS and IPS. Therefore, it has to be recognized that the commendable work of banks is being done only on the dependence of such expert employees.
It has been 50 years since the government banks were formed. They have set up their own infrastructure. Government banks have been successful in achieving customer satisfaction by properly implementing all government schemes and managing all aspects of banking. Therefore, handing over all these strong mechanisms to private capitalists on the basis of one year's economic results (due to losses) is tantamount to giving them a rectangular rose. It does not need anything.
The decision to privatize banks is dangerous not only for bank employees but for the whole country. And given that the decision-making process of the current government at the Center is a surgical strike, there is uneasiness among the employees of this bank as well as the customers of these banks. Today, at the Center is the government of the party opposing the nationalization of the bank in 1969. The chances of all concerned are high that all banks will be privatized overnight and then workers and people will have no choice but to agitate.
What problems can occur due to privatization of banks?
It has been proved that the bank loses its existence in the process of privatization and consolidation. Every bank has its own history, geography and culture. In view of this, the merger orphans the traditional customers of the bank that we have experienced with the customers of United Western Bank, Sangli Bank, State Bank of Hyderabad in the state of Maharashtra. Hence after the privatization of the bank, the purpose of the bank's existence changes. After bank privatization, social benefits are converted into numbers by misleading profits and this changes the policies of the bank. Banking is a service industry. While the public sector is still in its infancy, banks are excluding the common man from the banking circle in the process of raising various service charges using so-called autonomy. Given this, it is better not to think about the possible changes that may occur after privatization! Why is profit-driven banking going on without stepping outside the rural sector? In the process, this little man, rural section, backward class will be thrown out of the circle of development, not just banking. Then there will be options for modern lenders, who have swept ERVs out of the sector as non-banking institutions, in which the common man's savings on the one hand become unsecured and on the other hand high interest rate on the loan. Both these possibilities are going to make the life of the common man more difficult.
Given that the central government has played a role of total privatization by turning the epidemic into an opportunity, the government's role has also been extended to the banking sector. This policy is being implemented today in the fields of Railways, Life Insurance, Defense Manufacturing, Mining etc. With a brutal majority in the Lok Sabha, the government is trying to implement all such policies as surgical strikes. In fact, in view of the far-reaching potential consequences of this policy change, all such important issues need to be intensively consulted at various levels. The government should create an open atmosphere for this discussion. Disagreement with the government means that if the government starts suppressing the voice of dissent from the point of view of treason, then the real shape it will bring can destabilize not only sociology, politics, economics, but the whole public life, That we have experienced from the epidemic. We are also experiencing the first Shine Bagh and now the peasant movement. The question is, are we going to learn anything from all this?
The state of private banks is a star-studded practice today. All good borrowers take loans from public sector banks at low rates according to their credit rating. As a result, private banks have to lend to secondary and tertiary borrowers at higher rates. This is because the savers also invest in government banks, even if their interest rates are low. Therefore, private banks accept savings by luring them to higher savings rates. As a result, they will have to raise interest rates. As a result, their profits go down. As a result, many private banks have closed down and declared artificial bankruptcies to drive away customers. If public sector banks are privatized, they too have to participate in this vicious cycle. Given the unfortunate involvement of private banks in the implementation of government schemes, it has to be kept in mind that if the existence of government banks ceases, the implementation of government schemes will become impossible and the country will suffer in the long run. Therefore, privatization of state-owned banks will be harmful in the long run. To understand this, one has to look at how banks are currently operating and why banks are running into losses and why all state-owned banks are being privatized on the pretext of these losses.
Operations of banks and reasons for losses: The main function of banks is to accept deposits and lend while both sides are taking risks. If the bank is not profitable, if the loan is not repaid, then there are bank options, depositors trusting the bank are in trouble. It is assumed that due to some real difficulties, the loans given may not actually be recovered and may have to be repaid. This is usually not a problem unless the ratio is within 3%, but if it exceeds this, and you accept Tulsi 3's international regulations, then you will have to make a provision for nonprofit property. Capital needs to be increased to maintain capital adequacy. To get rid of this, such loans are written off and the balance sheet is polished. Although such a non-performing loan is not technically sinking, its recovery rate is less than 8%, in a different sense it is almost the property of the sun. Doing this kind of business is such a cordial relationship between banks and industrialists that it has become the business of some industrialists and banks and it is adopting all the legal measures from day to day, which I call 'white collar crime'. The regulator is that the Reserve Bank is very disappointing in its performance in this regard and does not feel that it is using its powers as a regulator to improve the banking business. If they had made some improvements in loan disbursement and collection, depositors would have benefited from avoiding large amounts of capital support. The provision of one per cent of Sun's property was to be used for its approval, recovery and action against the persons responsible for it. If such concrete action had been taken, it would have given the right message. Political relations are also a major factor in this not happening, which is why I call him a bank businessman. If you want to start a separate business and take out a large loan, you have to take care that it will not be repaid, then the bank will write off the losses to the depositors and taxpayers. They will be free to borrow again. Those who approve such loans will go free every day. There is no example of being punished in such a long time. The reason behind every major reform in the banking business was the big scam that was exposed. The role of regulators in this regard was unclear. The picture is clear that banks and RBI are leaving depositors and shareholders to fend for themselves.
Long-term Consequences and Measures:
After the privatization of all banks, the equation of industrialists and industrialists' banks will emerge, but it is certain that this will lead to alternatively unforgivable losses for the general public and the country. If banks are privatized and industrialists set up anks in a situation where there is no doubt that industrialists will start a bank, they will still be able to meet their financial needs, but no one has control over it. Will not done. Economic and political power is more likely to be concentrated in their hands. You know what cooperative banks set up by politicians do. The biggest beneficiaries will be large industries as they alone have a large share of the capital required for this. It will raise issues such as internal governance between industry-sponsored banks and industries, security of depositors' money and accountability. It is possible to achieve industry capital participation in the current system by making the current banking system more transparent and robust, determining the responsibilities of the individuals concerned in this regard, and improving the recovery and recovery of loans. So the answer is no, because in its recent report, a five-member executive committee headed by PK Mohanty of the Reserve Bank, set up on June 12, 2020, made favorable recommendations that there should be no objection to setting up of large companies and industrial houses. . A bank. Accordingly, necessary amendments will be made in the Banking Act to establish banks for these industrialists and industrial houses. NITI Aayog has already favored this. That is, the equation of industrialists of banks and industrialists will emerge.
We have seen tremendous changes in a short time since the adoption of the Khaju '(privatization, liberalization, globalization) policy. If we look at the changes in the economic field, we will see that from the socialist point of view, we have made such things governmental, which we do not want to keep private. It benefited everyone in the early days, after which we are also enjoying the fruits of privatization. Subsequently, the pace with which we progressed in the traditional sense stopped intermittently, and the Kovid-19 crisis paralyzed the entire world economy. Efforts are being made to speed it up in various ways.
Recently, it seems that the Reserve Bank of India is now in favor of setting up a bank for industrialists and business houses. The reason is the same but it is not true. Drowned and took to the bank at the same time. The abyss. Of these, the government and some large private banks have survived due to their backers, which were merged with other banks, which did not receive such support. But it will make the rich richer and the poor poorer. If private banks start sinking more and more people's money, the general public will not be willing to save. This wide gap will push the present middle class towards poverty and create new economic ones. social problems. In short, the government's decision to privatize all banks is not in the interest of the country, but in the interest of the industrialists.
Author: Dr. Reshma patil
Nipani
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Email: reshmaazadpatil@gmail.com