Private banking driven solely with the goal of maximising profit endangers the safety of savings of people

 

by Ashok Kumar, Joint Secretary, Kamgar Ekta Committee

 

A recent paper on “Privatization of Public Sector Banks in India – Why, How and How Far?” was given wide publicity by the media controlled by big capitalists for two reasons. One, the paper recommended that barring the State Bank of India (SBI), which may remain under government ownership for now, all other public sector banks (PSBs) should be privatized. Two, it was due to the authors who have written it – Poonam Gupta, Director General of National Council of Applied Economic Research (NCAER) and a member of the Economic Advisory Council to the Prime Minister (EAC-PM) along with Arvind Panagariya, Professor of Indian Political Economy at an American University and the first Vice Chairman of the Niti Aayog from 2015 to 2017.

Privatization has been recommended by claiming that private sector banks have “performed” better than PSBs and that PSBs have “underserved the economy and their stake holders.”

For the authors, crores of small depositors in urban and rural areas, who are served by PSBs, are not stake holders. Nor are lakhs of bank workers. The only stakeholders that seem to be of concern are the big capitalists who are interested in buying PSBs.

The fact that 25 private banks in India had to be merged with PSBs to save them from failure shows that the claim of the better performance of the private sector banks is baseless. As recently as March 2020, a private bank had to be rescued by a PSB!

Since the PSBs have come into existence, failures of private banks have been avoided by the RBI by forcing a PSB to take over the failing private bank and absorb its losses.

The number of global bailouts of private banks – saving and loan banks crisis in 1990, failure of banks and their mergers during the financial crisis of 2007 to 2010 and subsequent bank crisis in Europe – shows that the better performance of private banks is a myth.

Time and again it has been seen that private banking driven solely with the goal of maximising profit would endanger the safety of savings of people.

While bank workers have been putting up staunch opposition to every move of the government to privatise PSBs, it’s time for all other workers and depositors to join them and defeat the anti-worker, anti-people privatisation of PSBs.

 

 

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