Date: 29.01 2021
Smt Nirmala Sitharamani
Hon'ble Minister of Finance and Corporate Affairs Government of India
New Delhi
Madam
OPPOSITION TO PRIVATISATION
OF PSU BANKS
Greetings on behalf of four Officers organisations of the entire banking industry viz. AIBOC-AIBOA-INBOC-NOBO.
01.We draw your kind attention to the various media reports announcing that the Union Cabinet has approved a policy to privatise public sector undertakings (PSUs), which is expected to be announced in the forthcoming Budget. Ironically, this PSU privatisation policy, which was first announced along with the Aatmanirbhar Bharat Package in May 2020, will only weaken India's self-reliance and make us dependent on foreign and domestic private capital. The announcement made last year identified "strategic sectors where the number of PSUs would be brought down between one and four. Banking along with insurance, steel, fertilizer, petroleum, coal and minerals etc. figure in the list of 18 strategic sectors
02. Even after the wave of mergers in the public sector banks undertaken by the Government, the number of Public Sector Banks (PSBS) stands currently at 12. These PSBs own around 60% of the total banking assets in the country and account for 64% of all bank deposits and 60% of total loans and advances. If the proposed privatisation policy is to be implemented, it would amount to privatisation of at least 8 PS&s, which will put an end to the market dominance of the PSBs
03. You are very much aware that it was the PSBs, created through nationalisation, which led to the growth and devet opment of banking across the length and breadth of the country, including unbanked rural and remote areas. The dom nance of the Psas insulated the Indian economy from the worst consequences of the 2008-09 financial crisis. Crucial schemes of financial inclusion like the Jan Dhan Yojana and MUDRA have been implemented by the PSBs much more ngorously than the other segments of the banking industry. Despite the sordid saga of humongous bad-debt accumula tion in the recent past, owing to big-ticket corporate debt-defaults, massive haircuts through the debt-recovery channel under the IBC and burgeoning NPA write-offs, the PSBs have registered positive operating profits year after year, which stard testimony to the hard work and efficiency of the officers and employees of the PS8S.
04. In this backdrop and at a time when the rational economy is still reeling under the impact of a severe recession caused by the Covid-19 pandemic we cannot fathom why the Union Government is keen on privatisation of PSUS in general and the PSBs in particular. It was the PSBs Regional Rural banks and old generation private banks have suc cessfully implemented all the schemes of the government to provide the much-needed fiscal stimulus during Covid times. The development of infrastructure can only be attributed to the contribution of PSøs in the absence of any major DFIs It is as clear as daylight that the only beneficiaries of PSB privatisation would be those entities who still owe the state-owned banks thousands of crore in corporate debt. While private sector banks like the Yes Bank, and earlier the Global Trust Bank, NBFCS ike IL&FS and DHFL co-operative banks like Punjab and Maharashtra Cooperative Bank (PMC) etc. have witnessed failures in the recent times, the PSBs have continued to ensure financial stabity and securi ty for the depositors. Experience tells us that strengthening the PSBs is the way forward for building an efficient, robust and stable financial sector in India,
05. We consider that any proposal for privatisation of Psas is retrograde, ill-conceived and thoroughly inimical to the national interest. Any step towards privatisaton, dilution of government equity and/or further mergers and amalgamation of PSBs would face stf resistance, nat only from our organisations but also from all the major stakeholders. We urge
upon your good office to kindly rescind any such privatisation proposal, if on the anvil not only for the PS8s but for all the PSUs The Union Government should rather initiate policy discussion on the ways and means of reforming and strengthening the PSBS
With best regards,
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