Vijay Prakash Srivastava
Withdrawal of government stake in public sector banks may be a welcome step in view of the advocates of a free economy, but if we look at the interests of the people directly associated with these banks, then such a decision of the government does not seem logical.
In the budget for the year 2021-22, the government had expressed its intention to privatize two public sector banks. In between, some such statements came from the Ministry of Finance that the government has not yet reached any final decision in this regard. Now at the end of May it was said that work on privatization of banks is in progress and important announcements will be made in this regard in the coming months.
The way public sector banks were merged in previous years, Air India was handed over to private sector, in the same way two public sector banks will be privatized, there is no room for doubt in this now. Notably, fourteen banks were nationalized in 1969 and six in 1980. Before nationalisation, there were very few branches of banks in the country. Most of these too were in metros and big cities. The customers of these banks and branches were mainly big traders, industrialists etc. Farmers, laborers and the lower middle class did not have access to banking facilities. After nationalization, a large number of bank branches opened in the country. Emphasis was laid on opening of bank branches in towns and rural areas and remote places.
Meanwhile, many schemes of development, especially rural development, were implemented through these bank branches. The big advantage of this is that the incidents of exploitation of villagers by trapping them in debt trap by moneylenders and moneylenders have now stopped to a large extent, because the institutional system of banks gives loans to villagers, farmers, artisans and other needy people easily. Is. A large community has been connected to the banking system through Jan Dhan Yojana. Clearly, public sector banks have played a major role in the development of the country and the empowerment of its underprivileged population.
But now privatization of banks is completely different from merger of banks. Several phases of mergers between public sector banks have been completed. But there is no concrete or scientific study to show that such a merger has resulted in any change in the efficiency, working efficiency and quality of customer service of the banks. It has certainly happened that some branches have had to be closed and in many places two or three branches have been merged into one. The requirement of employees is less, so the recruitment in these banks is not as large as before. One of the intentions of the government behind the merger of banks was to create big banks, which could be counted among the big banks of the world. At least for now this intention does not seem to have been fulfilled.
Handing over a state-run airline to private hands and privatization of a public sector bank do not have the same implications, as there is a difference between the two businesses. Airlines have a limited number of users, while a single bank branch has thousands of customers. Again, the majority of air travelers in our country are from the urban population and high-income group, while the customer segment of banks is represented by all from urban, rural to rich and poor. The airline, which has been disinvested by the government, was making losses for years. Whereas the public sector banks have shown losses rarely and banks can easily compensate for such losses with their profits. Withdrawal of government stake in public sector banks may be a welcome step in view of the advocates of a free economy, but if we look at the interests of the people directly associated with these banks, then such a decision of the government does not seem logical.
Privatization is the main theme of the government’s agenda. If two more banks are privatized as per the government’s plan, a large part of this target will be met. Many arguments are being given in support of this privatization. As the profitability of public sector banks is low as compared to private sector banks, these banks have high percentage of bad loans and their productivity is low. In fact, a common belief in India is that the private sector is more agile than the public sector. If this is the thinking about public sector banks, then there is no difference in it. It is also not necessary that every such thinking is correct in every case. In the public sector, there are many establishments in categories like Navratna, Maharatna, Miniratna, in front of which many big companies in the private sector also have little advantage. Clearly, the companies must have made such a profit only on the basis of their efficient operation.
While evaluating the achievements and performance of public sector banks, it should also be taken into account in the environment in which they operate. Everyone knows that these banks have to work on all the schemes of the government and also have to achieve the goals given by the government. In the matter of operations, as much freedom as the private banks have, the public sector banks do not have. Government banks also open deposit accounts with very small amounts and give loans to small shopkeepers, laborers, self-help groups.
With their resources they serve a large community. Whereas private banks have established a system of getting most of the bank’s functions done by people who are not their own employees. By getting more and more services done outside, they have kept their costs low and thus they are able to make more profit. An argument made in support of promoting the private sector is that the job of the government is not to do business. This may sound theoretically correct, but it is difficult to implement, especially in a country like India, where the emphasis has been on mixed economy since independence and where the public sector has played an important role in employment generation, industrial development, etc. has played.
Private sector banks have expanded their reach in the last decade and a half. It has opened its branches in metros and big cities as well as small places. In the year 2017, the government had announced its licensing policy for two new categories of banks, apart from commercial banks. This includes small finance banks and payments banks. Many of these two categories of banks have been set up and all are in the private sector. After the merger, where the business of public banks in the country has been limited, the private banking industry is spreading its feet rapidly. If two public sector banks go into the private sector, this balance will be disturbed further.
The Reserve Bank of India has already rejected the proposal to give banking licenses to corporate houses. Our central bank must have exercised its discretion in this decision. It would be appropriate that the government should take serious note of the differentiation of banking industry from steel industry or mining industry or any other such industry and understand the practical fact that the country needs both private and public sector banks.