Modi govt’s intent to privatise PSBs will deprive masses of financial justice
The banks, after turning into private entities, cannot be trusted to safeguard public money, and such a move will ultimately undo all the gains we have been enjoying through nationalisation of banks
July 19 became a historical date for banking sector in India in 1969 when the Congress led by the then PM Indira Gandhi nationalised the private banks in the country. Fifty three years later, on July 19, 2022, the Congress had to oppose PM Narendra Modi-led BJP government which is hell bent on privatising the nationalised banks just to cover its failure in managing them successfully in the last eight years, precipitating a banking crisis.
Since it came to power in 2014, Modi government de facto handed over the nationalised banks to its corporate friends who are chiefly to blame for Non-Performing Loans (NPLs) because many of them are not returning the loan amounts and the government is acting helpless. What’s worse is that this happened at the cost of honest, small borrowers. Consequently, a very large amount of banking assets became non-performing, commonly known as Non-Performing Assets (NPAs).
However, the Modi government and the Ministry of Finance led by Nirmala Sitharaman pin the blame for the crisis on government ownership of the public sector banks, and are keen to sell them off to the private sector in the name of ‘saving the banks’.
The Congress has slammed the Modi government for being on such a privatisation spree and is opposing the Bank Sale Bill.
Even the All-India Bank Officers’ Confederation (AIBOC) has expressed apprehension that the Modi government’s move to privatise PSBs was extremely dangerous and it would result in job losses, branch closures, and financial exclusion of the needy.
Who are the ‘chosen few’ to whom the nationalised banks are to be sold will be known only in the future. However, it has again been put on record by none less than Union Finance Minister Nirmala Sitharaman that the government was committed to privatisation of State-run banks, through a statement made in Parliament on July 18.
The Modi government introduced New Public Sector Enterprise (PSE) Policy for ‘Aatmanirbhar Bharat’ which was notified on February 4, 2021 and is applicable to Central Public Sector Enterprises (CPSEs), Public Sector Banks (PSBs) and Public Sector Insurance Companies (PSICs). Under this policy, PSEs have been broadly classified as strategic and non-strategic Sectors.
In the Union Budget 2020, Sitharaman had first informed the country that the government planned to privatise two PSBs and several other PSEs, which the government likes to call ‘disinvestment’. Detailed guidelines were issued in December 2021.
Modi government is desperate to sell off such public assets to help ease its own fiscal crisis, chiefly of its own making through policy experiments after deserting time tested paths. It has chosen to ignore the benefits that nationalization of banks brought to the overall development of the country and its people in innumerable ways.
In 1969, the government took over the ownership and management of private commercial banks in India because they were indulging in activities which were found hampering the nation’s economic development. Economic concentration of power was in the hands of a selected few and they were using the public resources as per their whims and fancy, supporting their favourites and excluding others. There was no question of social and economic justice and banks were functioning on sole motive of profiteering. This resulted into very low level of usage of natural and human resources for the development of the nation.
Additionally, common people did not have confidence in banking system of the country and mobilizing national saving was difficult. Even more difficult was channelising them into productive and economic justice sectors. One of the objectives of the nationalisation said that it was intended to prevent the use of bank funds for anti-social activities.
It is, therefore, clear that the move of privatisation of the PSBs would defeat the very purpose of financial inclusion of all. The sole motive of the private sector banks would be profiteering. They would like to give loans to their favourite industries or business for more profit. Their credit facilities wouldn’t be impartial. Sectoral and regional disparities in providing financial access will harm the cause of economic justice.
As for the allegation of inefficient management of public sector banks, private ownership is no guarantee of competent management. We have already seen it in several private sector banks or other institutions. Many of the private sector companies have gone bankrupt not only in India but the world over.
Public money will not be safe in private hand with their monopoly, which would lead to lopsided development of the country as a whole. Even during the pandemic, we have seen how the public sector protected the country. The private sector neither has the capacity to save themselves nor the people during a crisis.
Privatisation of PSBs would increase the cost of borrowing and investment, which would further create sectoral imbalance along with the output costs, which would impact the common people. Social, financial, and economic justice for people from all sectors of activities are bound to suffer partiality in private hands due to their mindset of pursuing profitability. Sectors with lower profitability would face more difficulty in accessing finance even if these may be important for the society or survival of individuals.
Risk of financial exclusion based on individual, sectoral, or regional factors will be very high. There is also a high risk of the private entities playing their game for financial dominance in the country, which will ultimately undo the gains that we have been enjoying through the nationalisation of banks in India.
Public savings must remain in public, not in private hands. We have enough experience of collapse of many private banks in the past, and people losing their savings. People need financial justice that private sector bank cannot provide.
Views are personal