During a recent event at the Delhi School of Economics, the Finance Minister Nirmala Sitharaman seemed to support the idea of privatising banks. This made United Forum of Bank Unions (UFBU), a group that represents nine major bank employee unions, upset with the Finance Minister.
Bank unions are upset with the Finance Minister for saying that privatising government banks (public sector banks or PSBs) won’t harm financial inclusion (banking access for all).
The UFBU believes that public sector banks (PSBs) have played a very important role in helping ordinary people and developing the country. The unions argue that since the nationalisation of banks in 1969, these banks have done a lot:
- PSBs helped in bringing banking to ordinary people.90% of accounts under the Jan Dhan Yojana (a government scheme to give every citizen a bank account) were opened by PSBs. Most loans for farmers, small businesses, students, and weaker sections come from these banks. PSBs are the main reason banking has reached villages and rural areas.
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They believe privatisation will hurt the public and will not help as:
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Private banks mainly focus on profit and rich customers, not poor or rural ones.
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Privatisation could threaten job security for employees and risk public money.
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In their view, banking is a public service, not just a business to make profits.
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UFBU want the government to strengthen PSBs instead of selling them by:
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Giving them more capital support.
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Improving technology and governance.
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Avoiding privatisation altogether.
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They also demand that before any big decision on privatisation is made, the government should hold public discussions and a debate in Parliament.
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UFBU also have argument over private banks. As private banks have also faced failures like YES Bank, Global Trust Bank, and Lakshmi Vilas Bank and public banks had to rescue them. Public banks are accountable to parliament and the public, while private banks answer only to shareholders.
The unions warned the government and said that “Public sector banks are a national asset. We will not allow them to be sold”. Privatizing them, will mainly benefit big corporates and weaken the social goals of banking. The bad loan (NPA) problem mostly comes from big corporate borrowers, not from small customers or farmers.
Instead, they want the government to help and modernize public banks. Improving governance and technology is better than selling banks to private owners.