Clarify stand on privatisation or denationalisation of banks: Congress to Government

Members in the Rajya Sabha expressed concern over bad loans and "political influence" in the banking system, as a Congress MP asking the government to clarify its stand on privatisation or denationalisation of banks.

The explanation was sought by the Congress leader Jairam Ramesh while participating in a debate on the State Banks (Repeal and Amendment) Bill, 2017 which seeks to approve the merger of associate banks with the State Banks of India.

The bill was later passed by a voice vote.

Responding to the almost 2-hour debate, Minister of State for Finance Shiv Pratap Shukla said the merger would make SBI profitable, improve its working capital and enable it to offer better services to its customers.

Participating in the debate, Ramesh said "I would like the minister of state to give an authoritative statement on the behalf of the government that privatisation of banks or denationalisation of banks is not on government's agenda."

He said, "We keep hearing from time to time that India requires lesser number of banks, banks should be merged.

Sometime, we also hear that banks must be re-privatised." "This loose talk that India required only six banks or seven banks. How do you arrive at 6 or 7 (number). India is a vast country. 1.3 billion people, 29 states, different regions, different requirements. How does somebody, an economist or a civil servant, determine that 6 or 7 banks are enough for India," Ramesh said.

He also wanted the minister to explain that these numbers were not being "plucked out of the hat" and the banks and their system of accountability will be strengthened.

The Congress leader was of the view that the merger of the banks must not be "a distressed marriage and a marriage between two unwilling partners."

On financial frauds, he said there has been "complete collapse" of the system within the government and the banks and the regulatory system.

He urged the government to use this opportunity to take the people into confidence "because there is nothing more psychologically devastating to a country when people begin to lose confidence in banks".

Ramesh was of the view that loosing confidence in banks was far more disastrous than losing confidence in politicians because they can choose politicians in elections but not banks.

In order to instill confidence among the people, the government should come out and say that these are steps they are taking to ensure improvement in governance within the banks, regulation of banks and government's relations with banks.

Talking about asset quality, AIADMK leader N Gokulakrishnan said the bad loans of associate banks will become part of the SBI which will help in better dealing of these accounts and the SBI will have more capital base to give more loans.

He said the merger will bring negativity on the profitability of SBI, but the customers of associate banks will have access to wider service base and more products.

BJP MP Ramkumar Verma said the merger had resulted in increasing SBI's employee strength from two lakh to 2.7 lakh and a wider service base for customers.

Sukhendu Shekhar Roy (AITC) said "We are helpless. Merger has taken place. If this will continue, there will be a danger to our economy."

He drew the attention towards banking frauds in the past and asked the government to take corrective step to strengthen governance and regulatory mechanism of banks.

Harivansh (JD-U) said this merger should have been done 25 years ago, Shiv Sena leader Anil Desai also participated in the debate.

Desai said no political influence should be there in the lending process by banks and every aspect of a customer must be evaluated on merit. "I think banking sector's health will be gauged from all," he said supporting the Bill.

D Raja of the CPI claimed that no benefits have been derived after the merger of five subsidiary banks with SBI.

"Merger with State Bank of India was avoidable, it is my view but government was in a hurry to do it. Now government has made it a fate accompli because it was done earlier," Raja said, while asking the government not to take any measure that may weaken the banking sector, or else, the economy will collapse.

"When the government decided to close down the five subsidiary banks and merge (them) with State Bank of India, we were told that this would make the State Bank of India a world-class bank and a stronger bank but the story now is different," Raja said.

"SBI is making losses, hundreds of branches have been closed down in many parts of the country NPAs have gone up.

Many big NPA accounts have gone to the Insolvency Tribunal.

The State Bank I am afraid will make further losses in the coming days," he said.

Observing that the government seems to be in a hurry to do things and comes to Parliament for ratification, CPI leader said "Why can't the government take Parliament into confidence? Why should government take decisions behind the back of Parliament, bypassing the Parliament and after that you come to the Parliament for ratification. Is it good for our democracy, government should think it over." In this context, he cited the examples of demonetisation and GST, alleging that the country is still facing problems.

"Government brought the ordinance on Insolvency Action on defaulters, what is the effect of that ordinance, banks have lost money and no recovery has been made through this measure," Raja said, adding that the government should consult Parliament before taking decisions and review these policies.

"Government should not try to weaken the banking sector in the name of Sabka Saath, Sabka Vikas finally you want to serve the interests of corporate houses and big business, that is what is happening in the country," he said.

He said Parliament was now left with a fate accompli and has to ratify the Bill.

Madhusudan Mistry (Cong) sought to know whether the merger of the five banks into SBI will satisfy the aspirations of people living in rural areas or only serve the wealthy businessmen and then pursuing them for recovery of loans. He also asked whether the SBI will become more efficient after the mergers.

Sathyanarayan Jatiya (BJP) claimed that due to government schemes, banks have become more accessible to the common man.

Vishambhar Prasad Nishad (SP) said regional development will suffer post the merger of the assets and employees of the five banks with SBI. However, he supported the Bill.

Vijila Sathyananth (AIADMK) said the government must assure the people that their money will be secure post the merger and the nationalised bank will not be privatised.

Mahesh Poddar (BJP) said the mergers will be beneficial for strengthening the country's banking system. He said there no proposal regarding the privatisation of SBI till date.

In his maiden speech, Anil Agrawal (BJP) said post the merger of the five banks with SBI will reduce the non performing assets (NPAs) of the bank and efficiency will increase, while improving the cost of money lending and giving better rate of interest to the depositors.

He said the number of ATMs will also rise dramatically thereby reducing the queues for withdrawal of money, adding that following of due diligence process by banks will eliminate the problem of NPAs.