Public sector banks, which have been the engine of growth in India since their nationalisation, financing agriculture, industry and infrastructure development, at times even at the cost of their own financial health, have unfortunately been treated like cash cows, with successive governments milking them to the maximum before leaving them in the lurch.
The neoliberal policies which the erstwhile United Progressive Alliance (UPA) government initiated, seriously undermining the financial health of the PSBs, have been followed with even more enthusiasm by the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) government, seriously jeopardising their survival.
The policies being followed by the present dispensation are deliberately pushing them over the brink, in order to make way for their privatisation. It seems a covert and stealthy exercise to reverse the nationalisation of banks is under way, given the series of policy decisions being unfolded by the Narendra Modi regime.
The first and foremost of these decisions is the gradual implementation of the P.J. Nayak Committee report. The committee was appointed by the UPA government in January 2014 to examine the working of PSBs and to ascertain whether adequate time was being devoted to the issues of strategy, growth, governance and risk management, and also to review issues such as the Reserve Bank of India’s (RBI) regulatory guidelines on bank ownership, ownership concentration and representation on the boards.
The terms of reference, industry experts had claimed then, were aimed at preparing the ground to hand over the banking industry to the private sector. The committee submitted its report within three months, in April 2014. But by then it was election time and the report gathered dust.
In January 2015, the Modi government took up this report and discussed it threadbare at a “Gyan Sangam” or bankers’ retreat on January 2-3, 2015, in Pune. The gathering, which was conducted to chalk out a road map for PSBs, was addressed by Modi himself, with P.J. Nayak in attendance. It not only endorsed the report in full but adopted its recommendations as its own. Some of the report’s main recommendations are:
* The Government of India should get out of the ownership of PSBs at the earliest by diluting its stake to less than 50 per cent.
* The equity held by the government in all banks should be transferred to a holding company to be set up by the name of Banking Investment Company (BIC).
* It should be an all-powerful body and take over the government's responsibilities in relation to the governance of banks in due course.
* Regulatory power of the government and the RBI should be vested fully with BIC and to achieve that, the RBI and the government’s nominees should be withdrawn from banks’ boards.
* The responsibility of choosing the chief executives, top executives and non-executive directors of banks, which rests with the government now, should be entrusted to a separate entity called Banking Boards Bureau, which will initially function independently and be taken over by BIC when it comes into being.
* PSBs should be freed from the purview of entities such as the Central Vigilance Commission (CVC) and the Central Bureau of Investigation (CBI) in order to give them a level playing field vis-à-vis private sector banks.
* Campus hiring should be facilitated and priority sector lending should be made profitable or reduced.
* Industry-level staff wages should be removed and staff wage revision made separate as per the performance of individual banks.
* Salaries should be restructured to incorporate variable pay, which should be linked to banks’ performance.
In a nutshell, the recommendations prepared the road map for denationalisation of PSBs. Its after-effects were felt when the government announced in the last year’s Budget that the Banking Boards Bureau would start functioning from April 2016.
Subsequently, the government organised a banking sector conclave in August 2014, called Indradhanush, to discuss the “road map for the future of [the] banking industry”. One of the outcomes of this conclave was the announcement that top executives of PSBs would henceforth be recruited from the private sector.
Banking personnel are worried that the government is gradually unfolding its privatisation agenda. The fear gets further substantiated when the background of the present dispensation is taken into account. Several bank officials pointed out that at the time of bank nationalisation, the Jana Sangh, the BJP’s predecessor, was the only party that opposed it.
Then, during the previous NDA regime, Finance Minister Yashwant Sinha introduced a Bill in Parliament in December 2000 proposing to reduce the government’s share in banks to 33 per cent, which was vehemently opposed by the unions and associations that were supported by the Left parties. Owing to the Left’s opposition, the Bill was sent to a standing committee and subsequently put on hold. Banking personnel fear that the NDA government, armed with a huge majority and the Nayak Committee report, could revive the agenda now.
“It is clear the government is determined to privatise public sector banks,” said D. Thomas Franco, senior vice-president of the All India Bank Officers’ Confederation (see interview). “Their frequent argument that public sector banks need huge capital to meet the requirements of Basel III norms, to the tune of Rs.1,80,000 crore in the next five years, points to a conspiracy because we do not need to enforce Basel III norms. Many developed countries, including the United States, have not even implemented Basel II norms. Basel norms are not mandatory. Our banks are in the public sector, covered by the sovereign guarantees of the Government of India, so we are not bound to give Basel norm guarantees.”
Franco, who is also general secretary of the SBI Officers’ Association, said the hue and cry over increasing non-performing assets (NPAs) in banks, which are also cited as a requirement for the huge recapitalisation needs of PSBs, is a fraud. “It is like calling the dog mad so that you can shoot it,” he said.
Bank associations have been extensively exposing the farce being played out in the name of NPAs, raising serious questions about the government’s intentions, he added.
According to Franco, the bulk of NPAs is recoverable because the NPAs are caused by targeted lending, which at times happens owing to government pressure. The NPAs are not caused by small borrowers, he said.
He cited an article written by Saumya Kanti Ghosh, chief economic adviser to State Bank of India, in The Economic Times , to prove his point that the government itself is bleeding the PSBs dry.
Ghosh has given figures to prove that it is a myth to say that PSBs are a monolith which the government has to repeatedly bail out infusing capital using taxpayer money. He called this evaluation a “comedy of (data) errors”.
According to Ghosh, the cumulative capital infusion into PSBs for the fiscal decade ended 2014 was Rs.60,000 crore but the dividend payout was roughly Rs.64,000 crore, while the cumulative income tax paid was around Rs.1.30 lakh crore. Thus, he concluded, the dividend and tax paid to the government together amounted to more than 300 per cent of the capital infusion. Reiterating the point that the government itself is to blame for the rising level of NPAs in PSBs, Franco said an analysis of the outstanding NPAs revealed that the government had made no serious efforts to reduce NPAs, and had in fact encouraged it to favour its preferred corporates. According to him, as on March 31, 2015, the NPAs amounted to Rs.3 lakh crore. Over 40 per cent of this (Rs.1.21 lakh crore) is due from 30 corporates, while over 30 per cent is due from some 6,000 individuals and institutions.
“Why does the government not name these corporates or these 6,000-odd individuals and institutions? Why has it never made an attempt to do recoveries?” he asked. Moreover, he added, government schemes put extra pressure on PSBs, citing the Jan Dhan Yojana, which he said put immense burden on PSBs as they had to meet more than 90 per cent of the target. Private banks had only a minuscule role in this, he said.
Even now, 50 per cent of all accounts are lying dormant with nil balance and the problem has further been compounded as the banks have also been pressured into giving the promised Rs.5,000 overdraft facility to account holders.
“On one hand we are forced to shoulder the government’s social responsibilities, and on the other we are dubbed non-profitable. How can this be allowed?” he asked.
The banking industry’s fear that it is gradually being pushed towards privatisation was further fuelled by the recent announcement of a scheme called Career Progression Scheme (CPS) for clerical staff in the five associate banks of SBI. The scheme, which is already operational in SBI, is aimed at giving clerical staff more responsibility in lieu of better remuneration. Though it may sound innocuous to a layman, banking staff said there was a heinous design behind this and they went on a day’s strike in protest on January 8. The All India Bank Employees Association (AIBEA), which gave the call for the strike, called it a success and announced further agitation programmes to “foil the managements’ designs”.
“Our salaries and wages are finalised through bipartite wage settlements, which [last] happened in May last year. Now they (the bank management) have inserted this thing about a little more payment in lieu of a little more work. This is encroaching on the union’s role. The bank management is trying to impose its authority on issues which are supposed to be settled through bipartite talks between the unions and managements. We will not allow this,” said C.H. Venkatachalam, general secretary of the AIBEA. According to him, the strike was also to oppose outsourcing of certain categories of work, such as sweeper work.
The strike call was supported by the officers’ associations too. M.V. Murali, convener of the United Forum of Bank Unions, said the issue was more of encroaching on the role of the unions.
“They have tried to change service conditions without consulting the unions and this is objectionable. If they are allowed to get away with this, they will extend it further,” he said. What is more objectionable is that the managements have resorted to arm-twisting the clerical staff into accepting this scheme in lieu of other benefits such as greater housing loan facilities.
However, bank managements do not think the CPS issue should be made a bone of contention between the personnel and the managements.
“The career progression scheme is for the empowerment of the staff members only. Moreover, it is completely voluntary. We are not going forward with anything without discussing it with all the stakeholders. There is nothing which cannot be resolved through discussion,” said S.A. Ramesh Rangan, Managing Director of State Bank of Patiala which is an associate bank of SBI and one of the banks where the CPS is sought to be implemented.
According to him, nothing in the scheme is against the interest of the personnel. Trying to explain the opposition to the changes being made, he said there was some innate fear among employees about changes but “they need to understand that times have changed and our attitude to work has to change in accordance with changing times”.
At a time when the “survival” of banks has become a major concern, employees need to understand “that we sink or swim together”, he said.
According to Ramesh Rangan, the banking industry on the whole is under pressure owing to stressed assets management and employees need to think how best “each one of us” can contribute in keeping the organisation afloat. “After all, the organisation gives us our identity and we should all put in our best to help our organisation,” he said. But the recipe of employees giving their “best” to the organisation apparently does not go down well with the staff, who feel they are “horribly overworked and terribly underpaid”.
Besides, once they start feeling the heat of privatisation, they find an uncertain future awaiting them. The unions and associations are not going to give in easily. “We have formed an all-India platform called National Platform of Public Sector Officers’ Organisation, with the participation of officers from the power sector, telecom, life insurance, etc. Railways personnel too will join soon. We plan an all-India agitation and also create awareness through street plays, short films, etc. Our campaign will be called Save Public Sector,” Franco said.
It is obvious that the government is not going to have it easy, despite its huge majority in the Lok Sabha.