68% of profit earned by PSBs spent on bad loan provisions; employees hold dharna against banks privatisation

Amid growing fear and anxiety about their future, employees working in various Public Sector Banks (PSB) under the aegis of United Bank Forum – representing nine powerful bank unions of the country – held a dharna before the Parliament on Thursday against the move to privatise public sector banks of India.

The Modi government had announced a series of banking reforms last year and said that the loss-making public sector banks would be privatised. The number of PSBs was reduced from 27 to 12 after the merger was announced as part of the bank reform; however, a bill to privatise the PSB could not be brought in during the last three sessions of parliament.

Debunking the 'loss-making' theory propagated by the government, bank employees alleged that the Modi government is playing into the hands of the big corporates.

Chorus for the privatisation of profit making PSBs is aimed at handing over enormous resources to a handful of corporations considered closed to the ruling dispensation, said one of the protesters.

If PSBs are privatised, it will destroy the rural banking system, said the All-India Bank Employees Association (AIBEA) – the largest bank union.

Talking to NH, C Ventakchalam, AIBEA general secretary said that 68 per cent of the profit earned by the PSBs goes to the bad loans.

“Thus, the bulk of the profits earned by the Banks goes for provisions for bad loans and writing off bad loans. Thus, people’s money is being looted by the Corporates… They will be interested in more profits only. Slowly only rich people will be encouraged to have accounts,” said Ventakchalam.

Highlighting difference between operating profit recorded by PSBs vis a vis provisions for bad loans Venkatachalam added that the PSBs recorded a profit of Rs 208,654 crores as of March 2022 but Rs 66,736 crores were given for bad loans. Despite this, Rs 66,736 crores was recorded as the net profit by the PSBs.

Stressing that the PSBs protected the savings of the people, Venkatchalam explained, “For the past 6 years, bad loan accounts have been referred to Tribunals under Insolvency and Bankruptcy Code (IBC). Instead of loan recovery, these loans are being sold to some other companies for a cheap rate and Banks have made huge losses. IBC has become a medium to loot public money because Banks incur huge cuts and sacrifice in these deals. Defaulters escape without any penal action on them.”

He reiterated the old demand of PSB employees that the government should not bring a bill on Bank Privatisation.

Will the govt bring PSB privatisation Bill in this session?

Given the privatisation spree launched by the Modi government, it was expected that the PSB privatisation bill will be brought in the ongoing Monsson Session.

But the Bill has not been presented yet. Moreover, the bill has not been included in the business list till the date. Unconfirmed reports suggest that “fearing backlash and due to policy hurdles, it is very unlikely that the government will introduce PSB privatisation bill in this session.”

The unconfirmed reports, however, are not enough to calm the anxiety and unrest among PSB employees.

Employees demanded that instead of going for privatisation, the government should recover loans from big defaulters.

We have been demanding action against them to recover the loans. But the government is giving them more and more concessions, said Venkatchalam.

Apart from the PSB privatisation bill, the uncertainty over the regulation of crypto assets continues, as the government has not included these two in the list of Bills to be introduced.

AIBEA rejects Panagariya report on privatisation

On July 13, former NITI Aayog vice chairman Arvind Panagaria and Poonam Gupta of National Council of Applied Economic Research submitted a report advocating privatisation of all PSBs.

Panagaria who is a known supporter of Gujarat Model argued that PSBs should be privatised in order to make the banking system more effective.

Calling the report, “a vindictive and revengeful report against public sector Banks” the AIEB said, “They have completely forgotten that in our country so many private banks have collapsed due to inefficiency and government banks had to merge and rescue them. They have forgotten that 90% of bad loans are due from the big private corporate companies.”