Nirmala Sitaraman, Minister of Finance, in her latest press conference, announced the merger of 10 Public Sector Banks (PSBs) to carve out four big banks. In the process six, PSBs are being closed. Presently the government is going through a syndrome of 5 trillion-dollar economy, and all their acts aim at achieving it. The government, while pushing this agenda, is not prepared to accept the crude reality that the economy is in crisis. This also leads to the most inconvenient question: who is responsible for the present state of affairs? It is obvious that this is the manifestation of wrong policy prescriptions since 2014.
At this hour of the crisis, there is a need to stabilise the economy. However, the latest announcement by the Finance Minister suggests that the government itself is leading us to instability. This will result in suspending the operations of those ten banks spread out across the borders in the entire nation. In case of merger of associate banks with the State Bank of India (SBI), in the process of consolidation, SBI has lost the business of associate banks. SBI suppressed this fact by manoeuvring quarter ending data. In case of merger of Dena and Vijaya Bank with Bank of Baroda, same was steered by most able corporate leader meticulously. While steering merger, all issues such as cultural, emotional etc. were handled delicately by respecting the entity which is being merged. All the issues were addressed professionally but with a positive frame of mind. Thus Bank of Baroda, in the process of merger, did not lose the business. This was exceptional and looking to the present leadership in those banks cannot be expected to repeat.
All those mergers are neither at the instance of customers, who in the market economy are said to be the king nor by the shareholders or board of Directors of the respective banks. Employees and officers have opposed it. This means all those mergers are driven solely by the government. This has been done so to carve out big banks to cater to the requirement of big corporates who presently are routing through consortiums for their credit requirements which it may facilitate them to avail from one bank. This means mergers are to facilitate big corporates who are the rootcause for today’s crisis in banking. As stated by the RBI in Financial Stability Report, of the total credit, 55 per cent goes to big corporates, of which 87 per cent is NPA. This speaks volumes on governments intentions.
In case of merger of associate banks; consequently, more than 1000 branches were closed and now in case of merger of Dena and Vijaya with Bank of Baroda around 500 branches are being closed. Now again minimum 2000 branches are likely to be closed. On the one hand, the government wants to implement Jan Dhan. The government claims that they have opened more than 45 crore savings Bank accounts. In the implementation of all flagship programmes of this government such as MUDRA, Atal Pension, Jivan Suraksha and all other insurance schemes for underprivileged sections of society, Direct Benefit Transfers meant for underprivileged etc. banking has a crucial role which can be served by opening more and more outlets and certainly not by closing it. Thus the government is pushing self-defeating propositions.
In the process of merger of banks large scale closure of branches is taking place and this space is being made available to new generation private sector banks, Payment banks and small finance banks in the private sector. Post reforms, in the last two decades, PSBs have lost market share of about 20 per cent, which means they have lost the business of about 35 lakh crores. On the one hand, successive governments are attempting to privatise PSBs, and since they are unable to do so, they are privatising the business. May be now this government with an absolute majority in Lok Sabha and a majority in Rajya Sabha may do it. Precisely this is the danger which is looming large on the Indian financial sector. The present political dispensation is one the which opposed Nationalisation of banks in 1969 and now they may attempt to do so to fulfil their agenda on the lines of the abolition of article 370 in the constitution.
The changes in finance are being decided outside the parliament. Lok Sabha is being made redundant in the decision-making process. This is the irony of the situation. Judiciary is adverse to touch the subjects in the name of the policy. In the process, a mockery of democracy has been made. The Constitution’s Fundamental Rights and Directive Principles are meant only for the academic discussions on TV shows.
In the process, the common man is being marginalised. They are being pushed outside the banking and development. This is likely to lead for not only economic but social imbalances as well. Does it mean that we are inviting anarchy? Only time will tell. But rest assured we have a strong home minister, more strong then prime minister. Both of them individually and severely are capable of taking care of us.