Intoduction
- Due to the pandemic, India cannot afford to fund its banks. The dimension of credit growth and management of loans — the assets side of the banks’ balance sheet is considerably worrying. Therefore, the prescriptions is the often repeated agenda of Big Capital, which is the privatisation of Indian banks and handing over the banking system to investors.
- Many countries have privatised their nationalised banks, including some from the erstwhile Eastern bloc countries. Argentina, Australia, Brazil, Bulgaria, Chile, Denmark, Egypt etc.
- Before bank nationalisation, a few corporate houses controlled all funds, credit flowed into speculation and the agriculture sector had virtually no access to credit. Nationalisation ensured that a large chunk of India’s population could access banking facilities, farmers got loans and the state could direct the flow of credit to priority sectors.
- Public sector banks are created out of public money. These entities are therefore duty-bound to extend all types of services to customers across categories. Privatisation will impact this very root purpose.
- Private sector banks 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.
What are challanges
- Privatisation of PSBs is not going to be easy, as it would involve building consensus amongst various stake holders, including unions and parliamentarians.
- The decision to privatise inefficient PSBs, consistently delivering negative returns, would require wide debate.
- As the Planning Commission was a vestige of the socialist era, so is social banking. It is time to reconsider whether PSBs, are really required to serve the purpose of social banking in our country and at what cost.
- Therefore, it would be useful to have a high-powered, government-appointed committee, to devise exact criteria, modus operandi, the type of privatisation model to be adopted, and engage with the social ramifications before privatisation is actually undertaken.
