For Immediate Release
Mergers! Systematic Privatisation of Public Sector Banks
New Delhi, September 2, 2019: We the undersigned organisations and individuals condemn the Government’s decision to merge 10 Public Sector Banks (PSBs) and demand immediate withdrawal of the mergers; Stop Privatisation of the PSBs; Take genuine actions to recover bad loans; Make Wilful default a criminal offence; and Draft environmental and social safeguard policies for lenders.
Nirmala Sitharaman, the Union Minister of Finance, in her press conference on Friday stated that the merger will not result in employee retrenchment; quoting the example of the merger of Dena Bank, Vijaya Bank and Bank of Baroda. What the minister ignored was that, as per the Parliamentary Standing Committee on Finance’s 2018 Report, by 2020, 95% of GMs, 75 % DGMs and 58% of AGMs would be retiring. The government is yet to take any concrete steps to address the impending major human resource crisis. This is neither mentioned nor redressed in the new announcements. Instead, mergers will only overburden the already understaffed banks.
Another inevitable fallout of mergers is the closing down of bank branches, ATMs and other banking services. But the minister cared not for the plight of the common people but easing lending for the corporates. While the new big banks would be lending to big borrowers, the common people would be left at the mercy of Banking Correspondents, failing ATMs, Payment Banks, the new small banks and the likes for their banking needs. The most imprudent step is this mad rush to create big banks when globally; the “Too Big to Fail” model has been debunked.
In the merger announcement, the systemic annihilation of PSBs was packaged in neat wrappers of governance reforms. The Bank Boards have been ‘empowered’ to appraise the senior management, to give longer-term or to reduce the number of members in the Board, to enhance the ‘fees’ of Non-official Directors (NOD), to train directors and more. But the cherry on the cake is the Management Committee of the Board’s (MCB) loan sanction threshold increased to 100% to favour large borrowers and them now having the power to recruit “Chief Risk Officer” from the market. Let us not forget that these are the same boards that have caused the NPA crisis by their reckless credit approval without any due diligence. Not a single action has been taken on any of the board members for lending to repeat defaulters. Further, one needs to know if the Chief Risk Officer, would function based on the “Risk-based Classification” of the banks prescribed by the now ‘dumped’ FRDI Bill.
One cannot miss the misleading half-truths that have become a regular feature of government announcements. Finance Minister claimed at the outset that the gross NPAs of PSBs have come down from Rs. 8.65 lakh crores (Dec 2018) to Rs. 7.9 lakh crores (March 2019). What Madam Minister conveniently left out was the 1.94 lakh crores write-offs were done by PSBs alone in FY18-19. The quantum of loans written off by public sector banks in FY18-19, according to Bloomberg Quint, accounts to nearly 25 per cent of their total gross non-performing assets. Similarly, in FY17-18, the write-offs by PSBs amounted to Rs. 1.25 lakh crores; and between 2014 and 2018 write-offs alone amount to Rs. 5,55,603 crores according to RBI data. It is a colossal waste of public money and the resources of the banks. Hence the government’s intention is not in recovering the NPAs and strengthening the PSBs but to clear their books of the bad loans in time to ease privatisation.
Privatising banks has been a quarter-decade-old project of the state. The Narasimham Committee in the 1990s paved way for foreign and private banks in the sector, reducing the number of banking officers through the Voluntary Retirement Scheme. But it could not achieve its dream of reducing the government shares to 33 per cent or the phasing out of priority sector lending. But, almost every successive committee and their recommendations prepare the sector for a market take over. In fact, most of the announcements by the Minister have already been recommended by the P.J. Nayak Committee (2014) like the mergers and strengthening the Board. The other major recommendation was to reduce the government shares to less than 50 per cent. Unless we unite to fight, that will soon become the reality.
Sitharaman’s first press conference laid down a slew of waivers for the “wealth creators” in the name of ‘reforms’. The reforms ranged from the repugnantly pro-corporate relaxations for tax evaders to the ridiculous suggestion to government departments to buy new vehicles to boost the automobile sector. The second press conference attempts to decimate PSBs in a single stroke.
This government’s contempt for the public sector is no surprise. When the Prime Minister’s stated position is that Public Sector Units deserve to die, this is only expected. In recent times we have seen the systemic destruction of many public sector institutions and now the attack is on the PSBs. What we need is greater accountability and transparency of banks from top to bottom. The progressive and democratic forces have to oppose this blatant destruction of PSB in the name of mergers.
1. Immediate withdrawal of the mergers
2. Stop Privatisation of Public Sector Banks
3. Take genuine actions to recover bad loans
4. Make Wilful default a criminal offence
5. Draft environmental and social safeguard policies for lenders
- Advocate Mukesh, Bundelkhand Legal Resource Centre
- Anil Chaudhary, Popular Education and Action Centre (PEACE)
- Anil T Varghese, Delhi Solidarity Group
- Ashok Choudhury, All India Union of Forest Working People (AIUFWP)
- Benny Kuruvilla, Focus on The Global South
- Citizen Consumer and Civic Action Group (CAG), Chennai
- D Thomas Franco, Former General Secretary, All India Bank Officers’ Confederation
- Dr Sanjay Mangala Gopal, National Alliance of Peoples’ Movements (NAPM)
- Dr Sunilam, Kisan Sangharsh Samiti
- Gautam Mody, New Trade Union Initiative
- Kuldeep Kumar Baudh, Bundelkhand Dalit Adhikar Manch
- Leo Saldanha, Environments Support Group
- Madhuresh Kumar, National Alliance Peoples’ Movements
- Nishank, Delhi Solidarity Group
- Musthujab Makkolath, Delhi Solidarity Group
- Rajendra Ravi, People’s Resource Centre
- Ravindranath, River Basin Friends
- Sanjeev Chandorkar, Associate Professor, Tata Institute of Social Sciences, Mumbai
- Sanjeev, Dalit Adivasi Shakti Adhikar Manch (DASAM)
- Shabnam Hashmi, Act Now for Harmony and Democracy (Anhad)
- Snehlata – FORCE
- Soumya Dutta, National Convener – Bharat Jan Vigyan Jatha
- Sreedhar, Environics Trust
- Tapan Bose, Chair, PIPFPD
- Uma, National Alliance of Peoples’ Movements
- Vijayan MJ, General Secretary, PIPFPD
- Work towards Education and Empowerment (WEE TRUST)
- Centre for Financial Accountability, New Delhi
- Financial Accountability Network India
For more information, please contact:
+91 73032 10990