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Govt of India goes ahead with 'deep-rooted' conspiracy to kill public sector banks

By Thomas Franco* 

The Finance Minister recently announced that government business handled by the government banks, i.e. public sector banks, will also be provided to the private sector. Already certain government businesses have been slowly handed over to the new generation private banks. State bank of India (SBI) was handling 99% of the government business at one point in time. Now it has come down to 58%.
​The government’s attempt may appear trivial to many, but the deep-rooted conspiracy is to kill the public sector banks by depriving them of not only government business but government deposits, government accounts, salary accounts of government and public sector employees and make it difficult for them to compete.
​While taking away the government business from the government banks, the Prime Minister also declares that government banks should increase the lending under government schemes. Let us look at some statistics.
Out of the total Jan Dhan accounts opened even with zero balance, less than 3% of the accounts are opened by private banks though they handle more than 30% of the total advances and deposits. As of February 24, 2021, there are 42.92 crore Jan Dhan accounts. Out of this 33.17 crore accounts are handled by public sector banks, with 15.53 crore accounts opened by SBI alone, which are unremunerative, and banks incur a cost in opening the accounts.
Out of total Jan Dhan accounts opened even with zero balance, less than 3% were opened by private banks
Arundathi Bhattarcharya, when she was chairperson expressed openly that her request to government to reimburse the cost of expenses on these accounts did not yield result and she increased the service charges like minimum balance charges, ATM charges, loan processing charges etc affecting the common men and women.
​Regional rural banks, which are also public sector banks, have opened 7.50 crore Jan Dhan accounts whereas private banks have opened only 1.25 crore. Similarly, in the case of Mudra Loans, public sector banks and regional rural banks have contributed a lot through direct loans and loans to non-banking financial companies.
​If we take SBI as an example, we can understand the contribution of public sector banks and how they indirectly benefit. As of March 2020, SBI had 44.89 crore customers, 22.84% of the market share in deposits, 19.69% of the market share is advances, 22,141 branches, 58,555 ATMs, 61102 business Correspondent outlets and handled Rs.52,62,643 cire government business.
Though the remuneration for handling government business is less than the expenditure to manage them, government Deposits are held with SBI. Most of the salary accounts were with SBI, including defence personal. Now Kotak Mahindra bank has signed an agreement for accounts of army personnel.
​In the last one year, SBI had given 36 crore housing loans. Most of them would be backed by salary accounts. Rs 2,19,062 crore personal loans were disbursed in a year which also would be backed by salary accounts under the express credit schemes.
​SBI and other public sector banks also handle other unremunerative schemes of the government like PM Jeevan Jothi Bima Yojana, PM Suraksha Bima Yojana, Atal Pension Yojana. They also run Rural Self Employment Training Institutes (RSETIs) to provide skills to unemployed youth. SBI alone has 152 RSETIs and 341 Financial Literacy Centres, which conducted 29,995 camps on financial literacy last year alone.
​SBI alone has spent Rs 27.47 crore on corporate social responsibility. In the last one year, SBI has given 76,572 education term loans and disbursed Rs 8,777 crore and handled 44,24,777 kisan credits.
​By taking away the government business, banks will lose government commission on government business, lose government deposits, lose salary accounts which all will lead to a reduction in income. But under pressure, they will continue to give loans under government schemes like Mudra Yojana, which turn into non-performing assets (NPAs) very quickly. This reduction in business will lead to a reduction in staff strength.
​These banks only implemented the demonetisation schemes without any financial support from government and lost a lot in collecting, handling and disposing of the old currency. After milking the Public banks so much, now the government wants them to go to Goshala and die a natural death. It is the government policies that increase the NPA, and the government wants to kill the government banks without understanding the consequences.
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*Former general secretary,  All India bank Officers’ Confederation. Source: Centre for Financial Accountability

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