The Finance Minister has announced that Govt business handled by the Govt Banks i.e. Public Sector Banks will also be provided to Private Sector. Already certain Govt businesses have been slowly handed over to the new generation Private Banks. State Bank of India was handling 99% of the Govt business at one point in time. Now it has come down to 58%,
The Govt’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 Govt business but Govt Deposits, Govt Accounts, Salary Accounts of Govt and Public Sector employees and make it difficult for them to compete.
While taking away the Govt business from the Govt Banks, the Prime Minister also declares that Govt Banks should increase the lending under Govt 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 24.02.2021, there are 42.92 crores Jan Dhan accounts. Out of this 33.17 Crore accounts are handled by Public Sector Banks. 15.53 Crore Accounts are opened by SBI alone, which are unremunerative, and banks incur a cost in opening the accounts. Ms. Arundathi Bhattarcharya, when she was Chairperson expressed openly that her request to Govt 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 Crores. 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 Cr 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 Cr Govt Business. Though the remuneration for handling Govt business is less than the expenditure to manage them, Govt 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 Govt 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. 8777 Crores and handled 44,24,777 Kisan credits.
By taking away the Govt business, Banks will lose Govt. commission on Govt business, lose Govt Deposits, lose salary accounts which all will lead to a reduction in income. But under pressure, they will continue to give loans under Govt Schemes like MUDRA Yojana, which turn NPA 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 Govt and lost a lot in collecting, handling and disposing of the old currency. After milking the Public Banks so much, now the Govt wants them to go to Goshala and die a natural death. It is the Govt policies that increase the NPA, and the Govt wants to kill the Govt Banks without understanding the consequences.
Thomas Franco is former General Secretary of All India Bank Officers’ Confederation.
Originally published in Cenfa.org