When Union Finance Minister Nirmala Sitharaman declared 10 public sector banks’ (PSBs) merger to form four big banks, the banking and finance industry wasn’t surprised. As Sitharaman had earlier declared that the government will pump-in Rs 900 billion to recapitalise the PSBs, in order to increase their lending capacity at the hour of utmost economic crisis, this merger was quite an anticipated step. It wasn’t a path-breaking decision by Sitharaman, rather, a mere repetition of the former United Progressive Alliance’s (UPA) agenda.
During its last leg, the UPA government thought about merging several small PSBs with each other to form bigger entities and, thereby, increase their lending capacity. One of the reasons that the UPA started thinking about the merger possibilities was the rising non-performing assets (NPA) of the PSBs. The National Democratic Alliance (NDA) under Prime Minister Narendra Modi and his Bharatiya Janata Party (BJP) brought the number of PSBs down from 27 to 12 through mergers, however, the NPAs reached a record peak during its rule.
Kolkata-based United Bank of India and Gurgaon-based Oriental Bank of Commerce were merged into New Delhi-based Punjab National Bank (PNB), which made the new entity the second-largest PSB with a total business of Rs 17.95 trillion. Bengaluru-based Canara Bank will absorb Manipal-based Syndicate Bank and become the fourth-largest PSB with a business volume of Rs 15.20 trillion. The fifth-largest PSB would be the merger of Hyderabad-based Andhra Bank with Mangalore-based Corporation Bank, which will make its combined business worth Rs 14.59 trillion. Lastly, Chennai-based Indian Bank will absorb Kolkata-based Allahabad Bank to own a total business of Rs 8.08 trillion.
Bank of Baroda is the third largest PSB with a total business of Rs 16.13 trillion, while State Bank of India (SBI) happens to be the largest one with a total business volume of Rs 52.05 trillion.
The mergers of the above banks aren’t final as the merging exercise can continue further. The Modi regime is eager to create giant PSBs to consolidate their financial resources and assets, as well as club the NPAs. To achieve this goal, the government is moving fast and merging PSBs on the basis of the software they use for their banking. The merger on the basis of the banking software program used will help banks in easy management of affairs and transition of absorbed banks to the anchored banks. This will also result in a wholescale closure of multiple branches, ATMs and lay-off of bank staff. The bank unions have vehemently opposed this arbitrary merger of branches by the government. Even the Bharatiya Mazdoor Sangh — the labour wing of the BJP’s ideological mentor and the vanguard of Hindutva fascism Rashtriya Swayamsevak Sangh (RSS) — opposed Sitharaman’s action and promised to align with other unions in protesting and resisting this decision.
Now, after this merger of 10 banks into four, a few serious questions will arise about the financial health of these PSBs and, of course, the government’s real goal behind this move. What has driven the Modi regime to merge these 10 banks? Is it merely the call of the hour to increase credit inflow into a stagnant, quagmire economy? Was increasing demand through higher availability of credit, especially in the automobile sector, one of the aims of the government for these mergers? Despite the government hyping the ostensible goal of streamlining better credit facilities and reduction of NPAs as its principal motives behind these mergers, the actual goal is to start massive PSB privatisation drive to ensure a total hegemony of a selected group of crony-comprador capitalists and their foreign masters on the Indian economy. A Credit Suisse report has already shown that it’s unlikely that credit flow will be better after these bank mergers, rather it will not help the market as much the government is claiming. Thus, the privatisation cat is out of the bag.
Since the beginning of the PSB privatisation drive started by late Atal Bihari Vajpayee-led NDA, the big crony-comprador capitalists, their foreign masters — the big monopoly and finance capital-owned organisations — have called the shots in the banking and financial sector. The lion’s share of credit from the PSBs was offered to big corporations, Indian and foreign, who never repaid their debts, rather, used the subterfuge of losses to evade repaying and, thereby, pushed the PSBs into a major crisis.
The evil nexus between the government, the PSB management, and the crony-comprador capitalists opened a wide horizon of loot and plunder of PSB funds by drooling corporations. Though the Modi regime made a lot of noise over correcting the course and bringing discipline in the banking sector, its meddling on behalf of a chosen few big corporations pushed the PSBs to a far intense crisis than before. Rather than enforcing a tough process to collect the NPAs from the corporations, the Modi regime kept recapitalising the PSBs so that more credit can flow to the big crony-comprador capitalists who liberally donate to the coffers of the BJP.
Nirav Modi, the infamous diamond merchant found in a photograph with the prime minister during one of the latter’s incessant foreign tours, and his uncle Mehul Choksi, a man the prime minister once praised during an event at his residence, fled India by duping PNB of Rs 110 billion. More than Rs 90 billion was stolen by Kingfisher group’s infamous owner Vijay Mallya, who was allegedly helped by former finance minister late Arun Jaitley to flee India. Other big-ticket bank scams also involve people close to the Modi regime and the RSS-led Hindutva fascist ecosystem, who are either staying aloof from the law using their clout on the regime or have fled the country by now.
According to a report by Livemint, Care Ratings found 17 banks, 16 PSBs and one private, having total NPA of more than 10%. The finance minister announced a drop in the NPAs of the PSBs during the Modi regime during her press conference with sheer mendacity. She didn’t say that the government had written-off Rs 2.4 trillion-worth bad debts in a period of three years, which is an act of utmost profligacy as the public exchequer was used to pay for the money looted by Modi’s top corporate donors. As the government now chest thumps over a “significant” reduction of NPAs, it’s concealing the fact that the recovery rate of the PSBs from the corporate sector didn’t get better, and it’s still hard for these banks to extract money from the tycoons close to the Modi regime.
Ironically, by citing the losses made by the PSBs due to the NPAs and corruption, their privatisation is constantly advocated by a plethora of neo-liberal economists and so-called experts, who double as bootlickers of the same corporations that have plundered the PSBs. With the help of the NITI Ayog, which provides a neo-liberal economic prescription to the government, the Modi regime is going to start a spree of PSB divestment, using the few top banks as lucrative bait for foreign and domestic corporations. Even after two decades of starting the bank divestment move, the Indian state couldn’t privatise all PSBs completely, fearing a massive backlash from the employees who have been bitterly opposing any such attempt. This is a reason that the government still holds majority stakes in the PSBs.
For example, the SBI still has 54.23% government stake, the PNB has 58.87% government stake, while it’s 69.23% in the case of Bank of Baroda. For Modi, a significant reduction in the government’s stakeholding in these banks is an urgent task to earn some money that can be used to provide relief packages to big corporate houses during the hour of slowdown, while also to dangle lucrative economic baits before the common people through some theatrics of social-welfare. The NITI Ayog and the Finance Ministry are closely working on a blueprint that will divest majority stakes of the government from the lower-rung of the PSBs in terms of business volume and performance. However, as the corporate world wouldn’t like to take the burden of PSB NPAs and own banks known for their financial under-performance, therefore, more of these 12 banks can be merged with each other to end up at three or four big PSBs that the international finance capital and their Indian comprador lackeys will find promising ventures to invest in.
In a few months, the Modi regime will open the door of PSB privatisation ajar for big global finance capital from the US, the UK, the European Union and Japan. The doors will be opened for the big Indian crony-comprador capitalists as well, who have plundered the PSBs hitherto with utmost impunity. The assets of these PSBs, built using capital infused by the government from the public exchequer for years, will be utilised by the private corporations for their super-profits. The smooth transition of public ownership to private, corporate ownership, will become a major setback for the Indian people as they will suffer immensely due to the plundering of these PSBs’ resource and their own money by the very corporations that have drained these banks earlier through bad loans.
Contrary to the mainstream view that privatisation of banking will improve service quality, reduce the NPAs and make the banks more professional, it will actually provide unbridled access to public money to the same gang of corporate bandits who have plundered these banks earlier. As the PSBs provide a promise of security and stability to the finance market, therefore, large-scale bank scams didn’t take place in India, except few, in the last 50 years. If the PSBs are privatised, the public sector’s role in the finance market comes to an end, then it will start a vicious cycle of financial scams, loot and despair in India, that will affect the economy quite badly and destabilise the finance market.
With private ownership, each bank will be able to issue bigger loans to the businesses of their stakeholders or companies associated with them. NPA recovery will fall, and corruption will reach its peak. One after another sting operations in the past categorically shown how intertwined the private banks are with corruption, nepotism and malpractices. They can easily promote malpractices like money laundering, etc, by charging a commission to their big-ticket clients. It’s evident, after getting a majority stake in Indian PSBs, these crony-comprador capitalists and their foreign masters will leave no stone unturned to stop the public banking services the PSBs were providing and engage in debauchery. That’s how capitalism operates.
With the privatisation of the PSBs, the crisis-ridden agriculture sector will be worst hit. PSBs are the only banks, apart from cooperative banks, which provide credit to farmers and rural communities. The PSBs provide essential banking backbone support in rural India where the return on investment is never quite high, thus the private sector never ventures to that territory. Yet, these PSBs stand as an antidote to the feudal usurers and unscrupulous moneylenders, who reign in the poorly-served countryside. Though the rural credit, farm loans and services aren’t available to each farmer, but only to the rich and the middle ones, the presence of the PSBs and the cooperative banks prevent the domination of the feudal usurers, who will be emboldened once the PSBs are privatised and stops their rural operations. It’s not surprising that the vast majority of feudal landlords and moneylenders vehemently support Modi and the BJP, and forms their socio-economic support pillars in rural India.
Though the PSB employees have been waging heroic struggles against the government’s attempt to privatise these banks and even participated in a nationwide struggle in August 2019, yet, the government is showing the audacity to merge the PSBs and privatise them out of sheer hubris. The Modi regime is determined to complete all unfinished businesses of its masters — the big crony-comprador Indian capitalists and the foreign corporations — and in the present circumstances it will not budge to the demands of the bank employees unless the latter can build up an intense, massive and hard-hitting struggle that can send shivers through the spine of the government and its big corporate masters. Only the bank employees’ struggle against PSB privatisation, supported by the people’s solidarity struggle in different other trades and industries, will ensure the capitulation of the Modi regime. It’s very important for the economic security of the country, its future generations, and for their own jobs and livelihood, that the bank employees elevate their anti-privatisation struggle to the next level of resistance and force the government to quit the privatisation agenda.
An avid reader and a merciless political analyst. When not writing then either reading something, debating something or sipping espresso with a dash of cream. Street photographer. Tweets as @la_muckraker