The All India Bank Officers’ Confederation (AIBOC) on Tuesday said privatisation of public sector banks (PSB) would result in job losses, branch closures and financial exclusion.
“PSB mergers have brought down the number of public sector banks from 27 to 12, setting in motion the process of employee retrenchment and bank branch closures; total employee strength of PSBs has fallen from 8.57 lakh in March 2017 to around 7.7 lakh in March 2021,” the apex organisation of bank officers in the country said in a presentation, adding that the total number of PSB branches declined by 3,321 between March 2017 and September 2021.
At an event in New Delhi, AIBOC General Secretary Soumya Datta added that PSB privatisation would accelerate these trends and shrink employment opportunities for the youth. The SC/ST/OBC sections would be deprived because unlike the public sector, the private sector does not follow reservation policies for the weaker sections, it pointed out.
The statement comes in the backdrop of the government listing the Banking Laws (Amendment) Bill, 2021 in the ongoing winter session of parliament. The bill seeks to amend the Banking Companies (Acquisition and Transfer of Undertakings) Acts, 1970 and 1980 and the Banking Regulation Act, 1949 to facilitate the privatisation of public sector banks.
“Driven by the profit motive, private sector banks concentrate on the more affluent sections of the population and the metropolitan/urban areas; privatisation of PSBs will therefore lead to the financial exclusion of the weaker sections of the society, particularly in the rural areas,” the confederation said.
Pointing out that PSBs accounted for 65% of all commercial bank deposits and 70% of all individual bank deposits in India, the AIBOC said Indian customers preferred the safety and security of their deposits offered by the PSBs.
“A significant number of private banks and financial institutions have failed in recent times, like the Yes Bank, Lakshmi Vilas Bank, IL&FS and DHFL; in contrast, there is not even a single instance of bank failure in the case of PSBs. Privatisation of PSBs will remove the sovereign guarantee behind the PSB deposits and make household savings less secure,” he said.
It highlighted that privatisation of PSBs would imply selling the banks to private corporates, many of whom have defaulted on loans from the PSBs. The growing NPAs and frauds in private banks also showed that these occurred independent of bank ownership. “Far from offering any solution to the NPA problem, PSB privatisation will only reward crony capitalism,” it said.
Pointing out that the Finance Ministry recently argued that NPA write-offs are part of banks’ “regular exercise to clean up their balance sheet” and since recovery efforts continued after the “prudential or technical write-offs”, they do not benefit the borrowers, AIBOC said, this is misleading because as per the Ministry’s reply itself, only ₹86,986 crore had been recovered from written-off loan accounts through various channels between 2016-17 and 2020-21.
“The total amount of NPA write-off during the same period was over ₹7 lakh crore; the PSBs have to make 100% provisioning for a written-off NPA account which contributed to their financial losses,” it said.
The officers’ grouping further said that if write-offs, rather than recoveries, become the dominant mode of NPA resolution, PSBs would continue to absorb financial losses year after year and their capital would erode as a consequence. “PSB recapitalisation in the backdrop of such capital erosion becomes a mode of bailing out private sector loan defaulters,” it said.
