‘PRIVATISATION NOT THE SOLUTION FOR BANKS’ PROBLEMS’
Interview with Thomas Franco, senior vice-president of the All India Bank Officers’ Confederation. By PURNIMA S. TRIPATHI - FRONTLINE
“AS far as public sector banks are concerned, the government’s attitude is like calling the dog mad and then shooting it. If there are problems of unprofitability and NPAs in PSBs, it is of the government’s own making. How can they make that an excuse to privatise us?” asks Thomas Franco, senior vice-president of the All India Bank Officers’ Confederation. Franco, who is also the general secretary of the SBI Officers’ Association, spoke to Frontline on the problems facing public sector banks and how the government is slowly pushing them towards privatisation. Excerpts:
Why, in your view, is the government pushing public sector banks towards privatisation?
As far as the government is concerned, whether it was the UPA earlier or the NDA, its agenda has been the same: privatise public sector banks. The UPA had set up a committee under P.J. Nayak to suggest reforms in public sector banks in January 2014. The main thrust of its recommendations was privatisation of PSBs. The report was put in cold storage because of the general elections, only to be resurrected by the Modi government. The Modi government not only endorsed the Nayak Committee report fully, but announced measures to implement the recommendations. In his Budget speech last year, Finance Minister Arun Jaitley announced that the Banking Boards Bureau would start functioning from April 2016 and this bureau would eventually be converted into the Banking Investment Company as per the Nayak Committee recommendations. Eventually, the government’s shares in PSBs would be brought down to 40 per cent and transferred to this company, which will have the sole power to regulate or control banks.
Once this happens, the other recommendations, such as reducing priority sector lending or making it profitable, cutting down on unprofitable banking activities such as investing in infrastructure projects or lending to small and medium entrepreneurs, will automatically follow. This would totally defeat the idea of inclusive banking as it is practised now and was the guiding principle at the time of nationalisation [of banks]. Besides, if we look at the government’s record, in 2000 too the then NDA government tried to reduce the government’s share in PSBs but dropped the idea because of our opposition and the Left parties’ support to our cause. This time, since they have the numbers in the Lok Sabha, we are afraid they might push through their agenda.
Why is there so much opposition to privatisation of banks? After all, the second largest bank in the country, ICICI, is in the private sector.
We must not forget the past history of private sector banks. Before 1969, all banks, except the SBI, were in the private sector. Between 1947 and 1969, 559 banks failed. A huge number of people lost their life’s earnings. The common man had no access to banks then, and the banks’ rural presence was nil. Bank nationalisation took place to make the shift from class banking to mass banking, and make inroads into rural areas. The lopsided banking was visible in the fact that in 1969 over 40 per cent of our GDP was coming from agriculture, but total loans to the agriculture sector was only 0.2 per cent. Capital was under the control of a minuscule percentage of the population.
Even after nationalisation, private sector banks continued to fail. One of the most prominent examples was the high-profile Global Trust Bank, whose chairman, Ramesh Jolly, was awarded the Banker of the Year award, and the very next year his bank posted a loss of Rs.1,100 crore. GTB was eventually merged with Oriental Bank of Commerce in 2003. Between 1969 and 2014, 23 private sector banks were merged with public sector banks for not working well. In this backdrop, we have to see the performance of PSBs, which have not only survived the major global economic crisis but also shared the government’s social agenda like the farm loan waiver, the Jan Dhan Yojana, priority sector lending and lending to small and medium enterprises. These are all activities which bring our profitability under pressure, and the private sector banks have almost nil presence here. They don’t share the government’s social responsibilities. Even in matters of recruitment, they don’t follow the government’s reservation policy or don’t show any enthusiasm in giving education loans to needy students. Thus, we can see that privatisation is not the solution for problems facing PSBs. The solution lies in making the public sector more robust, not pawning it in the hands of a few powerful individuals.
How do you plan to oppose the government if it is determined to privatise PSBs?
We have joined hands with other PSU organisations and floated the National Platform of Public Sector Officers’ Organisation. This has representation from banks, power engineers, telecom and insurance. The Railways too will join soon. We are planning a nationwide campaign to create public awareness. We will do it through street plays, short films and documentaries and so on. We also plan to organise alternative Gyan Sangams to educate people on the tremendous contribution of PSUs to nation building. The All India Bank Officers’ Confederation president, Y. Sudarshan, will inaugurate the national campaign on January 26 in Chennai. Our campaign will be called “Save PSUs”. The campaign will run in Chennai for 45 days, and then we will travel to other parts of the country.
We need to tell the people why it is necessary to save the public sector; why concentration of wealth in the hands of a few powerful individuals is not good for the common people; why we should learn from the experiences in Japan, Korea and the U.S.; why we need to heed the earlier warnings by the RBI, which said in 2010 that private sector ignored SMEs [small and medium enterprises], agriculture, education and export.
“AS far as public sector banks are concerned, the government’s attitude is like calling the dog mad and then shooting it. If there are problems of unprofitability and NPAs in PSBs, it is of the government’s own making. How can they make that an excuse to privatise us?” asks Thomas Franco, senior vice-president of the All India Bank Officers’ Confederation. Franco, who is also the general secretary of the SBI Officers’ Association, spoke to Frontline on the problems facing public sector banks and how the government is slowly pushing them towards privatisation. Excerpts:
Why, in your view, is the government pushing public sector banks towards privatisation?
As far as the government is concerned, whether it was the UPA earlier or the NDA, its agenda has been the same: privatise public sector banks. The UPA had set up a committee under P.J. Nayak to suggest reforms in public sector banks in January 2014. The main thrust of its recommendations was privatisation of PSBs. The report was put in cold storage because of the general elections, only to be resurrected by the Modi government. The Modi government not only endorsed the Nayak Committee report fully, but announced measures to implement the recommendations. In his Budget speech last year, Finance Minister Arun Jaitley announced that the Banking Boards Bureau would start functioning from April 2016 and this bureau would eventually be converted into the Banking Investment Company as per the Nayak Committee recommendations. Eventually, the government’s shares in PSBs would be brought down to 40 per cent and transferred to this company, which will have the sole power to regulate or control banks.
Once this happens, the other recommendations, such as reducing priority sector lending or making it profitable, cutting down on unprofitable banking activities such as investing in infrastructure projects or lending to small and medium entrepreneurs, will automatically follow. This would totally defeat the idea of inclusive banking as it is practised now and was the guiding principle at the time of nationalisation [of banks]. Besides, if we look at the government’s record, in 2000 too the then NDA government tried to reduce the government’s share in PSBs but dropped the idea because of our opposition and the Left parties’ support to our cause. This time, since they have the numbers in the Lok Sabha, we are afraid they might push through their agenda.
Why is there so much opposition to privatisation of banks? After all, the second largest bank in the country, ICICI, is in the private sector.
We must not forget the past history of private sector banks. Before 1969, all banks, except the SBI, were in the private sector. Between 1947 and 1969, 559 banks failed. A huge number of people lost their life’s earnings. The common man had no access to banks then, and the banks’ rural presence was nil. Bank nationalisation took place to make the shift from class banking to mass banking, and make inroads into rural areas. The lopsided banking was visible in the fact that in 1969 over 40 per cent of our GDP was coming from agriculture, but total loans to the agriculture sector was only 0.2 per cent. Capital was under the control of a minuscule percentage of the population.
Even after nationalisation, private sector banks continued to fail. One of the most prominent examples was the high-profile Global Trust Bank, whose chairman, Ramesh Jolly, was awarded the Banker of the Year award, and the very next year his bank posted a loss of Rs.1,100 crore. GTB was eventually merged with Oriental Bank of Commerce in 2003. Between 1969 and 2014, 23 private sector banks were merged with public sector banks for not working well. In this backdrop, we have to see the performance of PSBs, which have not only survived the major global economic crisis but also shared the government’s social agenda like the farm loan waiver, the Jan Dhan Yojana, priority sector lending and lending to small and medium enterprises. These are all activities which bring our profitability under pressure, and the private sector banks have almost nil presence here. They don’t share the government’s social responsibilities. Even in matters of recruitment, they don’t follow the government’s reservation policy or don’t show any enthusiasm in giving education loans to needy students. Thus, we can see that privatisation is not the solution for problems facing PSBs. The solution lies in making the public sector more robust, not pawning it in the hands of a few powerful individuals.
How do you plan to oppose the government if it is determined to privatise PSBs?
We have joined hands with other PSU organisations and floated the National Platform of Public Sector Officers’ Organisation. This has representation from banks, power engineers, telecom and insurance. The Railways too will join soon. We are planning a nationwide campaign to create public awareness. We will do it through street plays, short films and documentaries and so on. We also plan to organise alternative Gyan Sangams to educate people on the tremendous contribution of PSUs to nation building. The All India Bank Officers’ Confederation president, Y. Sudarshan, will inaugurate the national campaign on January 26 in Chennai. Our campaign will be called “Save PSUs”. The campaign will run in Chennai for 45 days, and then we will travel to other parts of the country.
We need to tell the people why it is necessary to save the public sector; why concentration of wealth in the hands of a few powerful individuals is not good for the common people; why we should learn from the experiences in Japan, Korea and the U.S.; why we need to heed the earlier warnings by the RBI, which said in 2010 that private sector ignored SMEs [small and medium enterprises], agriculture, education and export.
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