57th Bank Nationalization Day
57th Bank
Nationalization Day
SALUTE TO BANK
EMPLOYEES'
MOVEMENT.
Shyamaprasad Bhattacharyya
The Bank employees’ movements are CHOWKIDAR worth the name to save the nationalized banking sector for the interests of the depositors, farmers, small, medium entrepreneurs, manufacturing, infrastructure, and service sectors, and also for the welfare economy.
The Bank employees are observing this Nationalisation day of the banks, with renewed vigor and determination at this crucial and critical juncture, when an impending danger of privatization awaits Bank employees in particular and the economic fate of thousands and corers of masses across the different spectrum of the nation in general.
The NDA Government hangs around after stepping up moves in a breakneck speed for dilution public sector Banking, further liberalizing the banking sectors, encouraging the private sector and foreign Banks through FDI, and amending the Banking Regulations Act and Banking Companies (Acquisition and Transfer of Undertakings) Act.
1] Nationalisation of Banks on 19th July 1969
The Central government, led by the then Prime Minister Smt. Indira Gandhi had invoked the Banking Companies (Acquisition and Transfer of Undertakings) Ordinance, 1969, which empowered to nationalize banks. The order came into effect from the midnight of July 19, 1969 bringing within 14 largest commercial banks that accounted for 85 percent of bank deposits in the country then. Sri Morarji Desai finance minister then, remained adamant and refused to go ahead with the proposal. “Recent experience does not suggest that large banks need to be taken over to do something they have not been doing,” he wrote. However, on July 19, 1969, the Banking Companies (Acquisition and Transfer of Undertakings) Ordinance resulted in the ownership of 14 banks being transferred to the state. Further in 1980. The govt. Nationalized six more banks.
An authorised history of the Reserve Bank of India calls the action “the single most important economic decision taken by any government since 1947.”
We cannot forget the contributions of the then Bank employees’ leader who were constantly organizing movements for the demand of the creation of Public Sector Banks through Nationalization. We pay our Tributes to Comrade Naresh Paul, comrade Prabhat Kar Comrade Parvana, who created public opinion and organized bank employees in support of Nationalisation.
From the mid-eighties, the same Congress party jumped on the bandwagon of neo-liberal policies, that means in our understandable connotation, “lessening of State Control over the economic activities moving around production, distribution, and exchange. In 1991, the Congress Govt. Introduced market-controlled economic policies, relaxing to a great extent the state control, for this purpose, the banking reforms were taken up in pursuance of road map prepared by the IMF and the World Bank with the aim of paving the way for the privatization of the nationalized banking sector.
2] Privatisation: Immediate Agenda of the Modi Government
A] It was widely circulated in Media that 2 or 3 Banks are to be privatized. The Niti Ayog shortlisted 6 banks for the purpose and sent them to the Govt. of India for their final selection from the list. Thereafter, numerous media reports quoting a “reliable source” publish the names of 2/3 banks supposed to be privatized. The fact as of today remains that NITI AYOG or the Government of India has either approved or disapproved the report.
B] Major developments:-
i] Indian finance is in the midst of an ever-intensifying transition driven by changes in the financial and banking policy régime of the successive governments. The changes under the present policy regime keep hastening the end of social and development banking, speeding up financial exclusion and the process of fiscal consolidation and concentration, bringing financial fragility in every passing day, absolutely for the interests of concentrating capital in the hands of a few corporate barons.
ii] The declared “Disinvestment/Strategic Disinvestment Policy” Banking, insurance, and financial services are among the four areas considered strategic by the government, which is being pushed to the reality stage by stage by the NDA government. The state-controlled Insurance sector is now under severe attack. The Insurance Regulatory and Development Authority of India (IRDAI) has been increasingly acting as an agent in prising open the market in favour of private companies, the sharp business practices of private companies have placed public sector insurance companies at a disadvantage position. In 2018, the Union government’s decision to allow the publicly owned LIC to take a 51 per cent stake in IDBI Bank without giving the insurer the privilege of enjoying the managerial control that majority ownership normally conferred signals a travesty of the rules of conduct for the interests of the corporate barons.
However, let me once again come to the subject, as per policy features in strategic sectors, there would be a bare minimum presence of the public sector enterprises (PSEs). The remaining Central PSEs in the strategic sector will be privatized or merged, or closed next. The budget set a target of Rs 1.75 lakh crore to be mopped up from disinvestment. Of this, Rs 1 lakh crore is estimated to come from the sale of the government stake in PSU banks and insurance companies and Rs 75,000 crore from the CPSE stake sale.
Finance Minister Nirmala Sitharaman in the Budge 2020-21 unveiled the Disinvestment/Strategic Disinvestment Policy, which had four strategic sectors in which a "bare minimum" number will be retained and the rest would be privatised or merged.
In an address, Modi made it further clear, it would be a time gap strategy; ultimately government would hand over all to the private sector. The government has no business to do business.
iii] “Other than IDBI Bank, we propose to take up the privatization of two Public Sector Banks and one General Insurance company in the year 2021-22,” Smt. Nirmala Sitharaman Said in her budget speech on 01.02.2021 [ Budget Speech February 21]
iv]The government refrained from committing any capital for the PSBs in the Budget 2020-21, leaving it to the bankers for raising funds from the market, depending on the requirements. Before handing over to private hands, it would be lucrative for corporate entities to take over control by taking over a majority stake in disguise.
v] The declared privatization is not shaking off the Government stake partially but fully, i.e. 100%
vi] Currently, there are 12 public sector banks (PSBs),
vii] The Reserve Bank of India had released the Report of the Internal Working Group to Review the extant ownership Guidelines and Corporate Structure for Indian Private Sector Banks on 20th November 2020. The Internal Group formed by the RBI submitted [IWG] its report on 26th October 2020.
The mother frame of the recommendation is:- Large corporate/industrial houses may be allowed as promoters of banks only after necessary amendments to the Banking Regulations Act, 1949, to deal with connected lending and exposures between the banks and other financial and non-financial group entities; and strengthening of the supervisory mechanism for large conglomerates, including consolidated supervision. RBI may examine the necessary legal provisions that may be required to deal with all concerns in this regard.[Page-4] .The IWG, in its entire report, hammers on the entry of large corporate houses into the banking sector and in an explicit and implicit manner, advocated for privatization.
viii] Opposite Views Raghuram Rajan:-“The highly indebted and politically connected business houses will have the greatest incentive and ability to enter the arena of the banking sector.” The former Governor, Mr. Raghuram Rajan, and former Deputy Governor, Viral Acharya, in a joint note described it as a “bombshell “ and expressed concerns that it could further exacerbate the concentration of economic and political power in “certain business houses”. They also said that the proposal is "best left on the shelf". NCLT has been rendered ineffective. Rajan and Urjit Patel made a detailed study on it. The recovery from corporate through this platform is very negligible.
xi] Raghu Ram Rajan then:- Prior to IWG, Mr. Raghuram Rajan, headed a committee in 2007 and in its report submitted in 2008 vociferously recommended, “The public sector banks, accounting for 70 percent of the system, enjoy benefits but also suffer constraints, with the latter increasingly dominating. There is little evidence that the ownership of banks makes any difference to whether they undertake social obligations, once these are mandated or paid for. So on the net, what matters is how an ownership structure will affect the efficiency with which financial services are delivered. And it is here that government ownership is likely to have serious adverse effects going forward.”…………. The majority of this Committee does not see a compelling reason for continuing government ownership……… [Introduction, Executive Summary, and List of Main Proposals, Chapter 1, Page 1, Report of the Committee on Financial Sector Reforms. Available at RBI website]
xii] Today Rajan says one thing, yesterday said another. Mr. Viral Acharyya Mr. Urjit Patel and Mr. Raghu Ram Rajan hold the same view but having differences with the Present ruling clique on the method of implementation. No Fundamental difference.
3] PURPOSE OF PRIVATISATION:-
i] PSBs constitute more than 65% of the total banking business of all SCBs (Rs.136 lakhs cr deposits and Rs.104 lakhs cr advances as of March 2020) and the Private sector covers 30% of the business leaving the balance of 5% to foreign banks and Small Finance Banks.
ii] In the past NDA regime, performance of PSBs on average, share a very large portion of 85% of total gross NPAs, of which 90% are with the corporate entities- having been bestowed with favor by the Modi Government. If Privatized, the NPAs would never be paid back and crony corporate would breathe comfortably.
Iii] it is for the interests of the capitalists, by reducing the dominance of the banking sector with particular emphasis to PSBs which are the largest custodians of household savings, to divert to the new markets, institutions and instruments. The moves are on, in various ways, the rate of interests on deposits comes down every passing day, bank charges are on rising, branch and front line banking is forced to have a nosedive by reducing staff strength and customers’ facilities, distancing from general customers more and more relying on the digital platform in the name of so-called paperless banking.
Conclusion
The depositors suffer from an ever-declining rate of interests to serve the corporate houses .who is to raise the question, why thousands of cores of loan written off in favor of corporate houses, compromise of lent amount has been resorted to, by surrendering more than 80% of dues, frauds are rising in corporate borrowed accounts through the diversion of funds, falsification, etc.?
Who is to raise the question, why Public sector financial institutions were called for rescuing the private financial entities ?, No need to go back to the past history, the present unfolds the truth. Yes Bank, Lakshmi Vilas Bank, which institution rescued the bank? Yes, it is a public sector financial institution.
Let us not be under the illusion but move with determination to defeat the policies.
The Bank employees’ movement is confident that it would defeat the sinister policy of the Government. The glorious past of the movement in close ranks with the common masses of India, democratic and secular organizations of the working class and peasantry with the sacrifices of many leaders, activists forced the government to nationalize banks in 1969, ensured bilateral mechanism, earned defined rights and in the recent past forced the MODI Government to roll back black FRDI Bill.
The constituents of UFBU should stand unitedly to defeat the ploy of the Government. &IBA for de-uniting UFBU by proposing to exclude BEFI in bilateral discussions/ negotiations. By putting oneself into the trap of the government. Bankers' policy in that manner would aid the policy of splitting the unity of the bank employees’ movement. I trust the wisdom, sagacity, and experience of leaders would defeat this heinous policy as was done before.
March on to save the Public sector. Defeat Govt. Policies.
Shyamaprasad Bhattacharjee. 19.07.2025
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