People's Democracy

THE public sector banks in India today are in deep trouble as their bad debts (NPAs) are assuming gigantic proportions with no signs of any serious attempt to recover them. Add to this the unprecedented removal of workforce through the back doors, by resort to VRS, CRS and such other unfair schemes, and a gloomy picture emerges.

How could these banks survive if the policy makers and administrators themselves are indifferent and dishonest in recovering the accumulated bad debts to the tune of over Rs 1,00,000 crore? And will the banks become healthy by sending home large number of employees all of a sudden? These are serious developments against the interest of the banking industry, country and our people. Clearly, the BJP-led central government wants the nationalised banks to hand them over on a platter to the multinationals and money bags. In the process, they aim to bail out the wilful defaulters, who are no less criminals than daylight robbers.

It is noteworthy that the so called ‘mandirwallahs' are the active movers and shakers in the forefront to demolish the ‘modern temples of India’ the public sector banks, which had a network of over 45,800 branches in 1999-2000, more than four fifths of the total assets of all the scheduled commercial banks, deposits over Rs 7,37,000 crore, advances over Rs 3,52,000 crore, investment in government securities over Rs 2,37,300 crore, operating profits of Rs 13,064 crore (net profit of Rs 5,114 crore) and above all a work force strength of over 8,91,000 persons.

The position of the banking industry on the eve of nationalisation of the 14 major commercial banks in 1969 was -- deposits of Rs 3,989 crore, advances of Rs 3,034 crore and 8,262 branches.

The rapid progress made from this condition itself is a rebuff to all the detractors of public sector. In the seventies, even after two and a half decades of freedom, hardly a bank branch was seen for 64,000 people and now the gap has come down to 15,000 per office. Still the gap is big, hence, more branches need to be opened.

Banks and financial institutions, particularly in the developing countries are the worst victims of liberalisation, privatisation and globalisation. The financial crises in many countries of Latin America, Asia and Russia have to disclose, more or less, the same tragic tales. Blinded by globalisation and free market currents, several private banks of these regions resorted to short term foreign debts, currency and stock speculations, concentrated advances to real estate, to grab quick profits in the western pattern, only to find and end themselves as hopeless bankrupt cases causing terrible problems to the economies and millions of people.

Confronted with such cataclysmic crises, the worst suffered nations such as Indonesia, South Korea and Philippines took over some of their big private banks to halt further problems. Japan, which was at the top gear of globalisation and privatisation, has suffered severe financial crisis and even today has not recovered. It is seriously contemplating nationalisation of all its banks. India escaped from this crisis narrowly mainly due to the strength and stability of its public sector banks. This was despite having had the biggest security scam and surging bad debts.

Yet, a high pitched state sponsored propaganda for privatisation of the public sector banks in the country is continued, although there is not much support for that since among the people who see through the plot of the Vajpayee government as anti-national.

It is a part of history of this country that after nationalisation, a rapid change for the better, if not fully, to certain extent in the character, content and trends of banking sector emerged. The people in the remote regions of India received some financial help, support and more significantly, liberation from the tentacles of the greedy money lenders.

Yet this process was not fully gone through and the policy makers allowed the continuation of the exploitation by other private and foreign banks. Successive regimes at the centre took advantage of the nationalised banks for their political and personal gains rather than strengthening them. The current regime is even on the move to sell the giant public sector financial institutions to the foreign MNCs and money bags.

Noteworthy, forward steps, however, were that the nationalised banks expanded their units even to the remote areas throughout the country, rendered financial services to cottage, small scale and village industries, small farmers, self-employed persons, artisans and other neglected and priority categories, which no private banks in the country or anywhere in the world have done. Hence, it is in this significant sense of national spirit and democratic rights that the nationalised bank of India, have to necessarily be protected and expanded, irrespective of the hurdles, as effective economic and social instruments rather than mere profit extracting or money exchanging agencies. Globalisation and privatisation, as enough experience shows, have no such social and democratic commitments.

The period since the implementation , with much fanfare, of the new economic policies, several private banks failed, the biggest scam broke out, many banks lords and bureaucrats landed in custody, mutual funds collapsed and investors lost the money, markets, industries and even farm sector slumped, foreign banks openly indulged in scam, and worst of all the reforms increased poverty in India. Yet, the present government and RBI plan to pull down the nationalised banks by various steps.

The Vajpayee government is moving much faster than the P V Narasimha Rao regime. Making a calculated ‘U’ turn from the bank nationalisation schemes, it closed down several rural branches, reduced flow of finance to farm and small scale sectors and now is removing large chunks of the bank staff so that the privatisation plot of the nationalised banks could be achieved easily. The two part Narasimhan Committee reports and the Verma Committee report on the banking reforms in India, in nutshell, are as per the structural retrogressions framed by the IMF and World Bank, which the government and RBI most conveniently want to use to privatise the nationalised banks. In the latest RBI and government documents one can find more of it and the last budget of finance minister Yashwant Sinha has already declared that the government wants to reduce its holdings in the public sector banks to 31 per cent from 51 per cent and by doing so, it has been stressed, that the public sector character of these banks would not change. What a wonderful way to sell the capital assets of India to adjust to the revenue deficit, which has reportedly crossed over to 6.5 per cent of the GDP by now.

A calculated campaign has been unleashed by the government machinery and vested interests that the profits of the nationalised banks are meagre, they are overstaffed and are not viable and hence, deserve to be privatised. These canards are intended to help in downsizing and bailing out the influential defaulters. The recent study by experts shows that even the rural branches of the nationalised banks are profitable, whether profitability is worked out with reference to year end working or average of two years figures.(Economic and Political Weekly, May 1993) In fact existence and expansion of the rural branches of the nationalised banks are not only economically relevant but also found to be effective to build infrastructure and economic growth.

Profits mainly come from loans and advances. After the onset of economic reforms, bad debts, at the instance, backing of successive governments, bank lords and the RBI, got accumulated to an unprecedented and dangerous level and so, profits and capital became the major casualities. Consequently wages of the bankmen saw no commensurate increase. Unions of the bank staff made compromises on the last wage structure as a sort of sacrifice, the reason being to guard the public sector banks and yet all and sundry , including the well educated and informed persons, find fault only with the lower staff for every shortcomings in the administration and service in the banks. That made the government’s job easy in its plan of sending home maximum number of the bankmen with a minimum compensation. Those innocent employees caught in the government’s trap of VRS, altogether, failed to understand that work is life, and if that is lost everything is lost for them and their kith and kin.

The government often says that it cannot provide funds to the tune of Rs 2000 to 3000 crore to fulfil the required 10 per cent capital adequacy of one or two nationalised banks, although the same could very easily be done if only 20 per cent of the bad debts are recovered. Paradoxically, the government is ready to spend at once more than Rs 10,000 crore to remove on a mass scale over 2 lakh (estimated) employees from the nationalised banks by way of VRS. During the reform era, over 3 lakh posts in the public sector banks have not been filled, despite increased work and new areas of banking and in that place costly contract and external services are employed. Naturally, with such unhealthy trends, the banking industry and the country will fall to deeper economic crises. Computers are there, but they cannot think, speak and give the human touch as they are mere enabling instruments.

The much supported private banks, including the new ones are not at all much behind the schedule of increased bad debts. As per RBI’s latest report the gross bad debts of the old private banks to total advances are of the order of 11.3 per cent and that of the new ones have crossed 6.2 per cent. Last year, in the public sector, except the Indian Bank, which too has recorded improved performance, all others have secured better performance and transferred dividends and paid increased taxes to the central government.

The RBI is presently emphasising on the need for transparent practices in the banks, but strangely, itself is doing just the opposite. It is totally secretive on the question of the recovery of bad debts piled up in the public sector banks. It may sound strange but is absolutely true that the government and the apex bank are not even ready to disclose the details of the wilful defaulters. Worse yet, the foreign banks which indulge in scams, currency speculations and unfair labour practices, including non-payment of income tax over Rs 79 crore are fully encouraged.

Out of the vision of the freedom struggle came the promotion, preservation and growth of the public sector in the post independece era. Through this the goal of empowerment of the people was to be realised. Many giant public sector enterprises were a product of this vision. Likewise the public sector financial insitutions, which look after over 90 per cent of the financial needs of the nation.

It is a plain truth that India cannot eliminate poverty, illiteracy and inequality without the active intervention of the state through necessary support and service of the public sector banks and other financial organisations. Hence, any attempt to weaken them through deliberate non recovery of bad debts, VRS and or privatisation will result in disastrous economic and political crisis. The need of the hour is full protection and further development of these engines of India’s social and economic progress.