From our readers: Truth about today’s banks

Dear Editor,

The article titled ‘Concentration of Banking and Increasing Parasitism’ has exposed the huge danger of privatisation which otherwise has been presented to the people in a very misleading way. We are bombarded with catchy taglines in newspapers and television advertisements that give us an illusion of banks growing our savings!

I would like to highlight some important points that underscore the truth about the financial system in our country.

The income earned by banks consists of two major components: net interest income and non-interest income. Net interest income is the difference between the interest banks collect from borrowers and the interest they pay on bank deposits. Non-interest income of banks includes the fees charged on credit cards, late payments, online payments, ATM transactions, non-maintenance of minimum balance, early withdrawals of term deposits, etc. Expansion of digital payments on the one hand and diversion of bank funds into speculation has led to an enormous growth of such non-interest incomes of the biggest banks in the country.

Goods are sold with luring EMI offers to ensure people buy more. A portion of people’s salaries goes to the bank every month in the form of EMI. But what we don’t know is that these banks blatantly rob these people by using their hard earned money as interest to advance loans. Working people have to indebt themselves because they do not receive wages for the full value of their work and the large part of the value created by them is appropriated by the capitalists as surplus value. We are encouraged to invest in mutual funds solely in the interest of capitalist monopoly houses which is how the size of the mutual funds business has grown four-fold in the past 10 years.

The largest banks make more profits from gambling activities than from lending for productive purposes.

It is absolutely appalling to realise how the people are being fooled about the role of banks in the context of adversity like the current pandemic. HDFC bank, the biggest private bank in the country, reported a 20% jump in profits during the April-June 2020 quarter which was the lockdown period. Most people were struggling to make ends meet while the bank made profits of over Rs.2500 crores.

All the new policy measures and steps taken by the Government are aimed at creating a handful of giant-sized banks through mergers and privatisation. This is going to greatly intensify the domination of finance capital over the economy.  Monopoly banks are truly like parasites feeding on an increasing share of the new value added by human labour and making money from speculation that does not add any value to the economy.

The article has analysed the situation with great clarity and helped me understand better the role of banks and finance capital in the present situation.

                                                                                                    Yours sincerely,
Muskaan, Mumbai

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