Behind the present narrative of the banking sector’s success lies a sector that increasingly prioritises profits over nation-building.
By Shri Devidas Tuljapurkar, General Secretary, Maharashtra State Bank Employees Federation and Joint Secretary All India Bank Employees association
Very recently, the Government of India, through a press release issued by the Press Information Bureau (PIB), celebrated the performance of public sector banks. The narrative presented before the country was one of “historic achievement”, “unprecedented growth”, “record profitability” and “lowest ever Non-Performing Assets (NPAs)”. The government has naturally sought to project this as proof of the success of its banking and economic policies.
On paper, the numbers indeed appear impressive. But when one goes beyond the glossy presentations, statistical packaging and media headlines, an altogether different and disturbing picture begins to emerge. What is being projected as a banking success story is, in many ways, a carefully constructed illusion.
If one studies the internal position of banks as on the first week of March every year, most banks struggle to surpass the business figures of the previous financial year. The miraculous “growth” often materialises only during the final days of March. Massive institutional and government deposits are mobilised by paying exceptionally high costs merely to inflate deposit figures temporarily. Public sector institutions, government departments and large entities are approached aggressively to park short-term deposits so that balance sheets can look stronger on the closing date.
Similarly, banks frequently push cash credit account holders to draw the unutilised portion of their sanctioned limits before the financial year closes. The borrowed amount immediately returns to the banking system as deposits, artificially boosting both advances and deposits simultaneously. Through such accounting manoeuvres, banks showcase sudden growth in total business, current and saving deposits, advances, business per employee and various productivity ratios.
The same process also helps reduce the gross NPA percentage mathematically because the denominator — total advances — is inflated. In addition to this, banks resort to large-scale write-offs of bad loans. While write-offs are projected as reduction in NPAs, in reality they often help clean balance sheets cosmetically without necessarily recovering public money. Evergreening of stressed accounts, i.e., extending fresh loans to prevent existing loans from slipping into NPAs continues in different forms despite repeated regulatory warnings.
The celebrated reduction in NPAs therefore needs to be viewed with caution. A lower NPA ratio does not automatically mean healthier banking system. In many cases, it merely reflects engineered accounting, write-offs and balance sheet restructuring.
The same illusion extends to profitability.
The government proudly highlights record profits of public sector banks. But the question that must be asked is: Where are these profits generated from and at whose cost?
Today banks impose charges on almost every basic banking activity. Whether a customer deposits cash, withdraws money, seeks a statement, requests cheque books, uses ATMs beyond prescribed limits, asks for duplicate cards, generates PINs or avails even ordinary services, charges are imposed relentlessly. Banking, which was once treated as a public utility and an instrument of economic development, is increasingly being transformed into a fee-extracting commercial platform.
Ordinary depositors are effectively subsidising bank profitability.
At the same time, deposit interest rates continue to remain below the actual inflation experienced by common people. This means the real rate of return for depositors is often negative. The savings of pensioners, middle classes, workers and small savers are steadily eroded in real terms while banks continue to celebrate profitability.
On the lending side too, the priorities of banking have undergone a structural shift.
Public sector banks were historically created and expanded to support agriculture, small industries, employment generation, infrastructure creation and balanced regional development. They were instruments of social banking. Today, however, banks increasingly prefer retail lending, personal loans, consumption loans, credit cards and gold loans because these segments provide quicker returns, higher spreads and easier recovery mechanisms.
Agriculture and productive sectors are increasingly treated as “risky” while speculative and consumption-oriented lending is expanding rapidly. This reflects the deeper transformation of banking under neoliberal economic policies where finance is detached from production and increasingly aligned with consumption, speculation and corporate profitability.
Simultaneously, public sector banks are aggressively reducing regular employment.
Instead of recruiting permanent employees with accountability, institutional memory and social commitment, banks are increasingly relying on outsourcing, temporary staff, business correspondents, contract workers and third-party agencies. The objective is clear — reduce wage costs, weaken labour protections and improve profitability ratios.
But this comes at a huge social and operational cost.
Overburdened branches, reduced staff strength, declining customer service, growing cyber frauds, operational risks and weakening accountability structures are becoming common realities. The pressure on existing employees has become unbearable. Targets, cross-selling pressures and unrealistic performance expectations have transformed banking from a public service into a high-stress sales industry.
Employees are no longer evaluated primarily on the quality of banking but on insurance sales, mutual fund targets, digital onboarding numbers and fee income generation.
The human dimension of banking is steadily disappearing.
This transformation is not accidental. It is deeply connected with the broader neoliberal restructuring of the economy over the last three decades. Banking is increasingly being governed not by developmental priorities but by financial capital. The purpose is no longer nation-building, employment generation or balanced economic growth. The objective is balance sheet management, market valuation, shareholder confidence and profit maximisation.
In this process, public sector banks are gradually losing their original social character.
The irony is striking. The same public sector banks which survive on sovereign confidence, public deposits and taxpayer support are increasingly behaving like private profit-driven corporations. Their social obligations are diluted while commercial aggression intensifies.
The banking system today stands at a dangerous crossroads.
If banking becomes merely an instrument for extracting profits from customers, suppressing employees, neglecting productive sectors and manipulating financial optics, then the larger social purpose of public sector banking itself will stand defeated.
What is being celebrated today as a historic banking success may therefore actually represent the deepening financialisation of the Indian economy — where appearances matter more than realities, accounting optics matter more than social outcomes and profitability matters more than public purpose.
This is why the present narrative of banking success deserves careful scrutiny.
Behind the record profits, beneath the falling NPAs and beyond the glossy balance sheets lies a deeper truth — the emergence of a great banking illusion.
The situation in private sector banks is still the worst but the only difference is its affairs are not made available for the scrutiny & thus overnight it becomes a disaster!