With RBI’s Internal Working Group submitting its recommendation that Corporate Houses and Big Business Houses can be allowed as promoters of Banks, a lot of debate is going on. To us in All India Bank Employees’ Association (AIBEA), it is not very difficult—rather it is very easy—to come to the conclusion that allowing entry of Corporates to run their own Banks is a very bad idea, because we have our bitter experiences from our past.
Mismanagement of private Banks in our country is not a news to anyone of us. Every now and then we observe that some private Bank or the other is getting into problems. Few months ago, we saw the crisis in YES Bank and how it was bailed out by the RBI and government by managing capital from SBI. Now LVB has been donated to DBS. When you look back in the time capsule, the list is long.
Era of Bank Failures: 1639 Banks collapsed in five decades
During the years in 1930s to 1950s, all Banks in our country were private Banks, some of them also foreign Banks. In just 48 years, a total of 1639 private banks failed in the country; innocent people who had kept their savings as deposits in the Banks lost their money.
AIBEA took up the issue and built up a national campaign. AIBEA also launched agitation demanding safety for people’s money. In 1957 Com. Prabhat Kar, the then General Secretary of AIBEA contested elections and became a Member of Parliament. He championed this issue in the Lok Sabha by repeatedly raising this issue and forced debates in the Parliament. Thus, the AIBEA fought these issues both on the streets and inside the Parliament.
Due to all these struggles and efforts, Government agreed and an amendment was made to Section 45 of the Banking Regulations Act. This Amendment to the B.R. Act enabled the RBI to intervene in the affairs of any Bank in public interest and merge that sick Bank with another Bank. This amendment stopped abrupt closure of any Bank.
Since then, no Bank in our country has been closed down. All the ailing Banks were put on moratorium and merged with another Bank.
From 1961 to 1968, 263 private Banks failed but all these Banks were merged with some Bank or the other. No Bank was closed.
1969 — Golden Era of Nationalisation begins
AIBEA was not satisfied with this. It wanted the Banks to be nationalised so that not only is the people’s money safeguarded, but also that money is helpful for national development instead of helping the private owners to earn more profit. At the 1964 Conference of AIBEA held in Trivandrum, this call was given and a bitter struggle ensued. This struggle led to the Government accepting the demand and Madam Indira Gandhi nationalised the 14 major private Banks that were controlled by powerful Business Houses like Tata, Birla and others.
Public Sector Banks: Savior of people’s money
After nationalisation of Banks, so many failed private Banks have been merged with public sector Banks (see Table 1 for names of some of these banks). Public Sector Banks have become the Neelkant Mahadev by swallowing the poison of loss of the private Banks and safeguarding the precious savings of the common people kept in the Banks as deposits.
Table 1: Failed Private Banks Taken Over by Public Sector Banks
| Failed Private Bank | Merged with Govt. Bank | Year | Failed Private Bank | Merged with Govt. Bank | Year |
| Bank of Bihar | State Bank of India | 1969 | Bank of Karad Ltd. | Bank of India | 1993 |
| National Bank of Lahore | State Bank of India | 1970 | Kashinath Seth Bank | State Bank of India | 1995 |
| Krishnarao Baldeo Bank | State Bank of India | 1974 | Punjab Co-operative Bank | Oriental Bank of Commerce | 1997 |
| Belgaum Bank | Union Bank of India | 1976 | Bari Doab Bank Ltd. | Oriental Bank of Commerce | 1997 |
| Lakshmi Commercial Bank | Canara Bank | 1985 | Bareilly Bank Ltd. | Bank of Baroda | 1999 |
| Miraj State Bank | Union Bank of India | 1986 | Sikkim Bank Limited | United Bank of India | 1999 |
| Hindustan Commercial Bank | Punjab National Bank | 1986 | Benaras State Bank Ltd. | Bank of Baroda | 2002 |
| Traders Bank | Bank of Baroda | 1990 | Nedungadi Bank Ltd. | Punjab National Bank | 2003 |
| Bank of Tamilnad | Indian Overseas Bank | 1990 | South Gujarat Local Area Bank | Bank of Baroda | 2004 |
| Bank of Thanjavur | Indian Bank | 1990 | Global Trust Bank Ltd. | Oriental Bank of Commerce | 2004 |
| Parur Central Bank | Bank of India | 1991 | United Western Bank | IDBI Bank | 2007 |
| Purbanchal Bank | Central Bank of India | 1991 | Bharat Overseas Bank | Indian Overseas Bank | 2007 |
Bulging Bad Loans — Who are the main culprits
Everyone knows that the only major ill confronting our Banks today is the alarming and huge bad loans. Everyone also knows that the main people behind these bad loans are the Corporate delinquents and wilful defaulters, because of whom public sector banks have written off more than lakhs of crores of rupees worth of bad loans over the past many years (see Table 2).
Table 2: Losses Incurred by Public Sector Banks
Due to Provision for Bad Loans Given to Corporates, Rs cr
| Year | PSBs, Operating Profit | Provision for bad loans | Net loss |
| 2015-16 | 1,36,926 | 1,54,918 | 17,992 |
| 2016-17 | 1,58,982 | 1,70,370 | 11,388 |
| 2017-18 | 1,55,585 | 2,70,953 | 85,370 |
| 2018-19 | 1,49,804 | 2,16,410 | 66,606 |
| 2019-20 | 1,74,336 | 2,00,353 | 26,016 |
Can we hand over Banks to these very same Delinquents, Defaulters & Dodgers who are responsible for the losses being incurred by Public Sector Banks? Banks deal with people’s money. Banks deal with public savings. It is risky to hand over Banks to these Corporates. Our experience is very bad.
(The author is General Secretary, All India Bank Employees’ Association. Article courtesy: Mainstream.)
