The All India Bank Officers’ Confederation (AIBOC) on Tuesday said privatization of public sector banks (PSBs) will result in job losses, closure of branches and financial exclusion.
“PSB merger has reduced the number of public sector banks from 27 to 12, thereby speeding up the process of retrenchment and bank branch closure; The total employee strength of PSBs has fallen from 8.57 lakh in March 2017 to around 7.7 lakh in March 2021,” the apex body of bank executives 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 Secretary General Soumya Dutta said that privatization of PSBs will accelerate these trends and reduce employment opportunities for the youth. SC/ST/OBC sections will remain disadvantaged because unlike the public sector, the private sector does not follow the reservation policies for 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) Act, 1970 and 1980 and the Banking Regulation Act, 1949 to facilitate privatization of public sector banks.
“Profit motive driven, private sector banks focus on the more affluent sections of the population and in metropolitan/urban areas; Hence privatization of public sector banks will lead to financial exclusion of weaker sections of the society, especially in rural areas,” the union said.
Stating that PSBs account for 65% of all commercial bank deposits in India and all personal bank deposits, AIBOC said that Indian customers give priority to the safety and security of their deposits offered by PSBs.
“Many private banks and financial institutions like Yes Bank, Lakshmi Vilas Bank, IL&FS and DHFL have failed in the recent past; In contrast, there is not a single instance of bank failure in case of PSBs. Privatization of PSBs will remove the sovereign guarantee behind PSB deposits and make household savings less secure,” he said.
It highlighted that privatization of PSBs would mean selling of banks to private corporates, many of whom have defaulted on loans from PSBs. Rising NPAs and frauds in private banks also showed that these were independent of bank ownership. It said, “Let alone providing a solution to the problem of NPAs, privatization of PSBs will only benefit the conniving capitalism.”
Pointing out that the Finance Ministry had recently argued that NPA write-offs are part of banks’ “regular exercise to clean up their balance sheets” and since recovery after “prudential or technical write-offs” Efforts continue, so they do not benefit the borrowers, AIBOC said, adding that this is misleading because as per the reply of the ministry itself, loan accounts written off through various channels between 2016-17 and 2020-21 only Rs. 86,986 crore was recovered.
“The total amount of NPA write-offs during the same period was over ₹7 lakh crore; PSBs will have to make 100% provision for a written off NPA account, which contributed to their financial loss,” it said.
The group of officials further said that if write-off, instead of recovery, becomes the dominant mode of NPA resolution, PSBs will continue to incur financial losses year after year and result in erosion of their capital. “In the backdrop of such capital erosion, PSB recapitalization becomes a way to weed out private sector loan defaulters,” it said.