Nationalization of banks has not been beneficial to the people, but merger is not a solution either

npaGautam Thaker*

Centralized Trade Unions of the country such as INTUC, HMS, all the Leftist Organizations etc. by putting aside their ideological differences have joined together to wage a combined fight at the national level and given  call for a nation-wide strike on September 2, 2016. Farm labourers engaged in agriculture shall also join it. As the rights of the labourers concerning land acquisition and rights of livelihood have been severely strangulated, farmers and labour class across the rural and urban areas shall also participate in this strike. All the labour unions of the banking sector shall also take part in this strike.

Indian Banking institutions are unique and they thrive on the hard earned money of the common man. Currently, total deposits lying with the banks are in excess of Rs. 116 Lakh Crores and there is need to safeguard these precious savings of the people. At present, banking industries have turnover of over Rs. 81 trillion. Indian Banking industry shall attain 5th rank in the world in the year 2020. During last two decades and especially in the last 7 years there have been a lot many changes due to technology and computerization. Internet and mobile banking etc. have also entered in banking transaction.

One cannot overlook the share of public sector banks in the development of the nation. In the country, there are 26 nationalized banks, 20 private sector banks and 43 foreign banks. There are some 61 regional rural banks. While all these are the founding stones of the national economy, the present rulers are talking of merger of these banks and are in this way thinking of shaking the foundations of banking sector. They are not concerned or bothered about recovering the non-performing assets (NPA).

Thoughtless policy of the government towards the banks has been often creating problems for the economy and the people, instead of providing benefits to them. The NPA of the Banks have reached over thousands of crores, as will be evident from the following table:

table1Thus, looking to the above tables, 5,610 customers have pocketed amount of Rs. 58,792 crores of the Government, Private and Foreign Banks as bad debts, willful defaulters or bankrupts who are not repaying their dues. Such a situation is not good for the health of the economy. It can be said that condition of banks in India is not healthy but is sick. Banks have been crushed under the burden of NPA. Indiscriminate sanctions of loans and advances has dug grave of majority of the government banks. Recently, the Finance Ministry has pumped in about Rs. 22,915 crores but no establishment has been set up for the recovery which implies that condition of the banks will degenerate into the grip of sickness.

Willful defaulters
Willful defaulters

Thus since 2002 the amount of NPA has increased significantly. Overdue debts and doubtful debts have not cropped up overnight. In the face of this, we must conclude that standard of character and financial disciplines of the institutions including any person, firm or industrial house have gone down to the bottom line. Moreover, all the standards of the mentality of preserving image or prestige of a firm have undergone drastically. They do not feel ashamed of defaulting in bank loans and this is the image or impression of to-day’s era. Taking an entirely contrary illustration, if a lay man or small Trader or a poor farmer applies for a loan for a sum of 4 or 5 digits then he is asked to produce various kinds of documents and certificates and in the end, he is not given the loan.

We all know how a few years ago many banks of America were in doldrums and a major economic chaos had arisen. America could come out of this economic crisis only due to stringent rules and regulations as also integrity of its people. Whereas in our country since majority of the loans disbursed by the government banks have not been repaid, a shadow of difficulty hovering over the entire economy seems to have just begun and become tangible. It is a sad reality that after the world has acknowledged that the banks have become the best tool for nation’s development after nationalization of the banks; its success has not persisted till the present times.

To get out of all this, the government is talking about merger of the banks. In its mind, the government is toying with an idea that only 5 or 6 banks should operate in the country.  Government thinks that with the merger of the banks, efficiency and profitability of the banks will increase and the expenditure shall substantially come down as also there will be less of competitive tendency. By doing so, small industrialists-traders and 70 % poor people of India will not get any benefit.

It is true that the net outcome of nationalization has not been beneficial or advantageous for the people but merger is not its solution or a remedy. Development can be achieved by fostering harmony between customers and the banks. The present rulers must realize the truth that by lending loans and advances to small industrialists and farmers, banks can be made strong and sound.

In any country’s economy, banking and financial management plays an important role. In fact in the matter of financial affairs, weak or meek approach cannot be tolerated. The Parliament recently passed the Insolvency and Bankruptcy Act with a view that speedy administrative and legal actions can be initiated for recovery of NPA of the banks. Administration of financial departments has to be improved after shaking off from one’s mind, the policy of political pressure or the vote bank.

By entrusting wide powers to the National Company Law Tribunal and Debt Recovery Tribunal to fill up the vacant posts with immediate effect, system of recovery of loans and advances should be strengthened. Privatization / merger of Banks are not at all an option or an alternative for reducing the NPA. Banks can be revived or rejuvenated by taking stringent steps for recovery of NPA.

The challenge which the Banks have to face at present is principally due to the defaulters and bankrupts from the corporate sector. The only solution or remedy lies in recovering this NPA and bad debts through effective steps. Public Sector Banks fulfil the needs of priority sectors of the economy such as Agriculture, employment generation, poverty alleviation, rural development, women’s empowerment, development of infrastructure facility, education, health etc. and only through them the economy can be improved.

For all such tasks, if help and co-operation of office bearers of bank employees’ unions is taken then, only the train can be brought on the tracks of reforms. Only Reserve Bank’s control should be retained over the banks and not that of the government or the Finance Ministry and then only it will yield results. Banks will have to be allowed to function autonomously and outside the hold or control of political parties or the government. If the govenrment policy and pressure for the banks shall prevail in the right direction then perhaps the sinking ship of the economy may remain afloat safely and soundly.

*Chairman, Indian National Bank Employees’ Federation (Gujarat). Contact: gthaker1946@gmail.com

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