Bank employees went on a two-day all-India strike on December 16-17. The strike call was given by the United Forum of Bank Unions (UFBU) which comprises nine unions in the banking sector. Nearly 9,00,000 bank workers participated in the strike, resulting in the closure of banking operations of all the public sector banks. Through the strike, bank workers expressed their determination to defeat the anti-national and anti-social plan of the bourgeoisie to transfer ownership of public sector banks into private hands, to enable monopoly capitalists to rake in maximum profits.
The call for the strike was given by UFBU after the government announced that it would pass the Banking Laws (Amendment) Bill, 2021 during the ongoing winter session of Parliament. This was in line with the Finance Minister’s announcement in the 2021-2022 budget earlier this year that the number of public banks will be reduced from 12 to a maximum of four; and that at least two of them would be privatised this year. Since that announcement, bank workers led by the UFBU have carried out an all-India campaign to explain to the people how and why bank privatisation is against the interests of the public and of society as a whole. From December 1, the UFBU has been organizing a continuous protest in front of parliament, under the banner “Bank Bachao, Desh Bachao”.
Until 1969, when 14 of the largest privately owned banks were nationalised, all banks except the State Bank of India were privately owned. This was followed by the nationalisation of 6 more banks in 1980. The Banking Laws Amendment Bill, 2021 will amend the Banking Companies (Acquisition and Transfer of Undertakings) Acts, 1970 and 1980 under which the nationalisation of banks in 1969 and 1980 was carried out. It will also amend the Banking Regulation Act, 1949. Through these amendments, the legal framework for transferring ownership of banks from public to private will be created.
The advocates of privatisation argue that privately owned banks are more profitable than public sector banks. They ignore the fact that public sector banks have a large number of rural branches serving in every corner of the country. They advance loans to kisans and to small-scale enterprises, whereas privately owned banks have no obligation to do any of this.
Another argument advanced in favour of privatisation is that the government-owned banks have accumulated huge Non-Performing Assets (NPAs), meaning loans which are not being repaid. As a result, the government has to spend money on recapitalization of these banks. Those supporting privatisation claim that privately owned banks will not run up huge NPAs and government would not have to spend resources on recapitalisation of banks.
The actual experience with privately owned banks reveals a story of repeated banking collapses. The number of bank collapses averaged 38 each year in the decade 1949-1959. They were 30 each year between 1960 and 1969. In 1970, there were 50 privately owned banks, which number came down to 24 by 1995. At present, there are 21 privately owned banks in India, including 10 that have come up since 1995 following liberalization of rules for opening privately owned banks.
During the past two decades, the Reserve Bank of India (RBI) bailed out nearly a dozen private sector banks from collapse, by merging them with healthier banks. YES bank, the fourth largest private bank, was near collapse on March 5 2020, when the RBI imposed a withdrawal limit of Rs 50,000. The central government organised the State Bank of India to lead a group of investors to take over the management of YES bank, according to a three-year restructuring plan. The bulk of the capital for the restructuring came from the State Bank of India. Bailout of YES bank was justified with the slogan that it was necessary in order to save the reputation of private banking!
The international experience of banks reveals that in all the advanced capitalist countries, periodic economic crises are accompanied by the collapse of many private banks, not just the small ones, but also very large ones. Following the global financial crisis, 465 banks failed in the US during 2008-2012. At the same time, trillions of dollars of public money were used by governments to bail out several giant privately owned banks. This was done by categorising them as being “too big to fail”. Banks which were bailed out in this manner include JP Morgan Chase, Goldman Sachs, Bank of America, Morgan Stanley in the US, besides Lloyds and Bank of Scotland in Britain.
The British government spent 45 billion Pounds (Rupees 4.4 lakh crores) in just one year to bail out just one bank — the Royal Bank of Scotland. In comparison, the Indian government spent Rupees 3.15 lakh crore on recapitalizing public banks in the 11-year period 2008-2019 .
Privatization is not going to address the problem of banks going bankrupt. On the contrary, it is going to increase the danger of such bankruptcy. This is because the drive for maximum profits on the part of the private owners of banks leads them to lend in support of extremely risky ventures. When such a venture fails, the capitalist who took the loan is unable to repay it. Every downturn in the capitalist business cycle results in a large amount of defaulting of loans. This results in the collapse of a number of banks.
Why is it then that the government is hell-bent on privatisation of public sector banks, when the international and Indian experience of privately owned banks is extremely bad?
Indian monopoly capitalists are greedily eyeing the huge and growing profits being earned by banks and other financial companies. They want to grab the lion’s share of these profits. This is the real motive of the bank privatisation program.
The present stage of capitalism is characterized by the drive of monopolies for maximum profits from every possible sphere, including banking. Banking has been converted into a system of looting the people through all possible means. Banks engage in wild speculation in stocks, currency, bonds and commodity markets, gambling with the money that people have deposited in the banks. Bank employees are offered commissions and set high targets for mobilizing deposits, selling insurance policies, mutual funds, etc.
Life experience shows that state ownership of banking does not in itself change their capitalist orientation. As long as the state itself is controlled by the capitalist class, state owned banks will serve as vehicles for fulfilling monopoly capitalist greed. What is needed is that the existing state, which is an organ of capitalist rule, must be replaced with a state of workers’ and peasants’ rule. Such a state will be able to reorient banking and the entire economy to fulfilling the growing material needs of the entire population. Banking will then serve social needs rather than being geared to fulfil monopoly capitalist greed.
In conclusion, the privatisation of public sector banks is thoroughly anti-social and anti-national. Bank workers are fully justified in demanding that banking should be oriented to fulfill the needs of society, and not to maximize capitalist profits. The struggle of bank workers against privatisation deserves the support of the entire working class and people.