19th July 1969, the then Prime Minister Mrs. Indira Gandhi Nationalised 14 major private sector banks. Thus banking reached to the rural areas, backward regions. Banks started lending to the agriculture which enabled green revolution to become reality and thereby India became self reliant in food grains stocks. Banks started lending to priority sector, small and medium industry, cottage industry, small business, trade, transport business, self employment etc. resulting into generation of large scale employment.
In 1969 total bank branches were 8,262 of which in rural 1833 and semi urban 3342, which today are total 1,46,904 while rural 52,098 and semi urban 41,738. In 1969 per branch population was 64000 today is 9269. In 1969 deposits of all scheduled commercial banks were 4646 Cr, while advances 3509 Cr which today are deposits 139 lakh Cr rupees while advances 102 lakh Cr of which in 1969 priority sector advances where 504 Cr which today are 25 lakh Cr. The growth of banking in India consequent upon nationalisation is unparallel and unmatched. This enabled common man to put their savings in the banking which became source of economic development for the government.
Yes! That does not mean that everything in the banking was well. Banking is defined as a “acceptance of deposits for the purposes of lending”. The role of the government is to give direction to the banking but consequent upon nationalisation governments started using banking to sub serve their own political interests. Loan Mela were organised thereby to distribute hundreds of crore to nurture their own constituencies to serve narrow political interests. This was followed by repetitive debt relief announcements which vitiated the environment of recovery in the banking. At the same time big business by using their political clout got the sanctions of big amount which also became overdue and were written off in due course of time. Thus today banking is in deep crisis on account of mounting Non Performing Assets (NPAs).
This situation can be improved upon by giving genuine autonomy to the banks, more power to the banks in recovery of over dues, improvements in recovery laws, appointment of board of directors of the banks and also appointment of managing director and chief executive officer as also executive director purely on merits without any political intervention, accountability and answerability of board of directors and chiefs of the banks for Non Performing Assets in big business. This will definitely enable to overcome present crisis in banking but unfortunately government instead of resorting to above remedial measures is keen on perusing its own agenda of bank privatisation at the dictates of IMF, World Bank and political clout of the big business in ruling class. Thus big business who has looted banks for lakh of crore of rupees is day dreaming to be the owner of those banks.
Why new generation private sector bank Global Trust Bank failed? Why Karad Bank became insolvent? Why United Western Bank and Sangli Bank were merged? Why Yes Bank was put under moratorium? Why ICICI Bank terminated its own chairman Smt.Chanda kochhar? Many more private sector banks are in Q but frauds in those banks have not been unfolded since private sector banks are not covered under Vigilance Commission. Yes Bank episode can repeat in couple of big private sector banks at any time.
Global Trust Bank was rescued by Oriental Bank of Commerce, Karad Bank was rescued by Bank of India, United Western Bank was rescued by IDBI. All those ailing private sector banks were rescued by public sector banks. It was State Bank of India who rescued Yes Bank. The biggest private sector non banking financial company IL & FS was rescued by public sector State Bank of India and Life insurance Corporation. The government on the one account is using public sector institutions as savior for private sector institutions and on the other side is pursuing for the privatisation of public sector. This is called “Nationalisation of losses and Privatisation of profits”. The present government has implemented Jan Dhan, MUDRA, Social Sector Insurance schemes, Pradhan Mantri Awas Yojana, Make in India, Stand up India etc. all popular schemes through public sector banks. All those Jan Dhan accounts have been seeded with Aadhaar thus to enable to disburse gas subsidy, all sorts of incentives through those accounts which or otherwise would not have been possible. But for the involvement of public sector banks government could not have implemented those schemes.
Now Government should decide on whether they need illusionary accounting profits or sustainable social profit? In 2008-09 entire world was dragged in the crisis barring few exceptions like India since banking in India was in public sector, by all those who were perusing for accounting profits. Are we not supposed to learn from the history? If history repeats, entire economy of the country will be divested. Thus the call of 51st bank nationalisation anniversary is to “Defend Public Sector Banking – Defeat Bank Privatisation” to save people’s money which should be used for people’s welfare.