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Editorial: Misplaced Reforms Process

Chennai, 24 March 2021:

When Finance Minister Nirmala Sitharaman said in her Budget presentation for 2021-22 that the government intends to privatise two public sector banks, without specifying which ones, it was a part of a larger thrust by the government on roping in the private sector to pick up stakes in government-owned firms in a range of sectors that were to be identified by the Niti Aayog.

The strike by hundreds of thousands of employees in the public banking sector for two days on March 15 and 16, which has disrupted services across the country, is the first major nationwide strike related to bank privatisation plans after they were announced in the Union Budget on February 1 this year.

While the immediate reason for going in for a stake sale in public sector units was the need for revenue at a time when the Covid-19 pandemic had devastated all government calculations for raising funds, it was also seen as a move to fulfil the government’s promise of ‘more governance and less government’, a slogan that the BJP put forward in its 2014 general election campaign.

For fiscal 2021-22, the government plans to raise Rs 1.75 lakh crore through disinvestment of state-owned units, where it has included two public sector banks and a general insurance firm. However, the government’s track record in disinvestment is none too rosy, having garnered only Rs 32,000 crore in 2020-21 though the target was Rs 2.1 lakh crore.

However, as expected, the privatisation move has already run up against a wall of opposition. According to media reports, 1 million bank employees, part of the United Forum of Bank Unions (UFBU) have been protesting for the past month, which has culminated in the two-day nationwide strike.

The strike on Monday and Tuesday has inconvenienced customers as banks were already shut over the weekend of March 13-14. Except for ATMs, all other services have been affected by the strike. Members of the UFBU reportedly include the All India Bank Employees Association, the All India Bank Officers’ Confederation, the National Confederation of Bank Employees, the All India Bank Officers’ Association and the Bank Employees Confederation of India.Reports also say that the Niti Aayog, the government think-tank, has kept all public sector banks that were part of the last round of consolidation, and the State Bank of India, the country’s largest public sector bank, out of the privatisation plan.

Effective April 1 last year, ten public sector banks were merged into four in one of the biggest-ever consolidation exercises in this sector. The four anchor banks into which six others have been merged are Punjab National Bank, Union Bank, Canara Bank and Indian Bank, so these banks will not figure in the privatisation plan. Following the consolidation last year, there are, at present, seven large public sector banks and five smaller ones in India.

The banking staff strike comes at a time when there is much discussion on whether privatisation would be an answer to the woes of the banking sector. Last year, a working group of the Reserve Bank of India (RBI) had recommended allowing large corporate houses to work as bank promoters, after amendments are made to the Banking Regulation Act, 1949, to prevent connected lending and exposures between the banks and other financial and non-financial group entities.

The BJP Government at the Centre is seriously continuing the retrograde reform measures ignoring the real menace in the banking industry i.e. mounting bad loans and the growing list of Willful defaulters. Willful default by large corporate borrowers, imposed hair-cuts through ill-conceived Insolvency and Bankruptcy Code, has resulted in heap of write offs, making dent on the balance sheet of public sector banks. This has not only affected the profitability of the banks, but has become an alibi to allege inefficiency. The hard work of dedicated bank personnel has been constrained to go in vain.

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