By C H Venkatachalam
July 19, 2019 will mark the 50th anniversary of bank nationalisation. Fifty years ago, in the year 1969, it was on this historic date of July 19, the government brought the Ordinance nationalising the 14 major private banks in our country. Since then the banks have chartered a new course linking banking industry with the overall national economic development. Shedding their baggage of class banking, banks transitioned to mass banking and became effective instrument of economic transformation. Banks became the engine of basic economic growth and development.
Bank branches proliferated and banking became accessible to the common man. Neglected needs and sectors like agriculture, employment generation projects, small scale industry, rural development, health and education, women empowerment, poverty reduction, etc, became the priority sector. White revolution and green revolution became a reality and possibility because of massive bank loans.
The contributions of public sector banks in the last 50 years have been remarkable, outstanding and stupendous. The precious savings of the people have been mobilised and augmented into the banks. These resources have been made available for national development.
Though their contributions have been commendable and laudable, instead of further expanding and strengthening public sector banks, for the past 25 years, from the year 1991, the government has been pursuing their policy of banking reforms aimed at weakening and diluting the role of public sector banks and their objective is to privatise and hand over the banks back to the corporates, business houses and capitalists. Due to the continuous struggle of bank employees, privatisation of banks could be thwarted so far but the attempts continue even now.
Vigorous campaign was being launched and on February 17, 1963, All India Day was observed for nationalisation of the banks. All the bankwise unions besides the state federations gave memorandum to the MLAs, MPs, and political parties in support of this demand.
The period was 1966, when the country was in the grip of crisis of economy of unprecedented nature, when every monetary step of the government was failing in its objective. The monopoly capital was taking a grip over the economy of the country to the detriment of the common man, which was indirectly helped by the commercial banks, which was nakedly exposed by Mahalanobis Commission report. The banking system was creating credit for a handful of corporates and their industries, who think of ‘self’ before the nation. The process of concentration of wealth in the hands of the few was accentuated by the private banks. We crusaded that for checking of malpractices in foreign exchange, hoarding in foodgrains, crushing concentration of wealth in the hands of a few, gearing up agriculture, removing disparity in income, checking rise in prices, the banks should be nationalised.
The government of India fully understood that the savings of the public were being channelised to boost the wealth of the industrialists and corporates and the Indian banking industry instead of becoming an important tool to facilitate the development of Indian economy was catering to the need of a handful of few.
The then Prime Minister, Mrs Indira Gandhi, in this background both at the political and the economic fronts, expressed the intention of the government of India in the annual conference of the All India Congress Committee meeting in a paper titled, ‘Stray thoughts on bank nationalisation’. The paper was received with great enthusiasm.
The government of India issued an ordinance and nationalised 14 major commercial banks with effect from the midnight of July 19, 1969. Within two weeks of the ordinance, the Parliament passed the Banking Companies (Acquisition and Transfer of Undertaking) Bill, and it received Presidential approval on August 9, 1969.
The contributions of public sector banks in the last 50 years have been amazing. The precious savings of the people have been mobilised and augmented into the banks. These resources have been made available for national development. Though their contributions have been commendable and laudable, instead of further expanding and strengthening public sector banks, for the past 28 years, from the year 1991, the government has been pursuing the policy of banking reforms aimed at weakening and diluting the role of public sector banks and the objective is to privatise and hand over the banks back to the corporates, business houses and capitalists. Due to the continuous struggle of bank employees, privatisation of banks could be thwarted so far but the attempts continue even now.
Today, orchestrated attempts are being made to marginalise the public sector banks. The government is allowing free entry of private corporates and business houses to start their own banks and licences to open Payment Banks, Small Banks are being given without much ado. The whole idea is to encourage private sector banking and to weaken the public sector banks.
The only main challenge of public sector banks is the alarming increase in bad loans. It has crossed all acceptable proportions and has reached dangerous levels threatening the sustainability and viability of the public sector banks. However, the government is trying to help the corporates by trying to resolve the problem of bad loans instead of concentrating and taking effective steps for recovery. The Insolvency and Bankruptcy Code (IBC) has become a tool to allow the defaulting corporates to escape. As a result, the banks would be writing off huge portion of the bad debts, which are happening right under the nose of the government such as Bhushan Steel, Electro Steel, Alok Industries, etc, wherein the banks had to bear as high as 83 per cent haircuts. The IBC Code is used as an instrument to leave the defaulting willful corporate defaulters scot-free.
Hence, it is for us to fight these offensives when the public money kept as deposits in the public sector banks are being used to bail out the corporates while the common clientele of the banks are forced to pay enormous amount as service charges.
Today, banks have entered a crisis zone. On the one hand banks have mobilised huge savings of the people and on the other hand huge amount of loans given to the corporates are stuck up as non-performing loans. Instead of taking tough action and recovering the loans from them, they are being given concessions after concessions. Profits earned by the banks are eaten away by provisions made for bad loans.
While the corporate defaulters are being extended velvet treatment, the burden is being transferred on the shoulders of the poor bank customers. Service charges and penalties are being imposed on them to pay for the sins of corporate loan defaulters. Adding insult to injury, the government was proposing to pass the FRDI Bill aimed at empowering RBI to offset the deposits of the people to adjust the losses of the banks caused due to corporate defaulters. Thanks to our united opposition and campaign, this move was abandoned and the Bill was withdrawn.
In this scenario of multiple offensives against public sector banks, the bank nationalisation day this year assumes special significance. The public sector banks are nation building institutions and it should remain so. We shall have to wage a decisive battle to stop the government from privatising the public sector banks and no sacrifice is big enough in that struggle against these ill-advised moves of the government. (IPA Service)