In the context of the Non-Performing Assets (NPAs), or bad loans, of the biggest banks in the country having crossed Rs. 10,00,000 crore, various spokesmen of the capitalist class have been escalating the propaganda that privatization is the way out of the banking crisis. However, some of the latest developments expose the fallacy of this prescription.
Axis Bank, a privately owned bank which had made profits of Rs. 1225 crore during January-March 2017, reported a loss of Rs. 2188 crore in the same quarter of 2018. This exposes the lie that private banks always make profits.
ICICI Bank, one of the oldest and largest private bank in the country, has been hit by allegations of fraud at the highest level of management. This exposes the lie that only public sector banks are corrupt.
The root cause of the problem of NPAs lies in the monopoly capitalist system, in which banks play the role of agencies for maximising capitalist loot. The problem has become more aggravated in recent decades because of the State opening up all avenues for maximum capitalist loot, under the banner of globalisation, liberalisation and privatisation.
All commercial banks, including the public sector banks, have come under pressure to expand their lending activity as rapidly as possible and compete to achieve the highest rate of profit. Huge sums of money have been loaned out for all kinds of speculative profiteering projects of the capitalist class, headed by the monopoly houses.
The measures which the Central government has taken, in the name of addressing the problem of NPAs, are actually aimed at benefiting the big capitalists, who are the cause of the problem.
In a recent interview, Comrade A. H. Venkatachalam, General Secretary of the All-India Bank Employees Association (AIBEA), pointed out that the Insolvency and Bankruptcy Code (IBC) introduced by the present government is a mechanism to force banks and other lenders to settle for big sacrifices, called “haircuts”. Through this mechanism, public sector banks are being made to sacrifice as much as 75% of what is owed to them by some big capitalist borrowers. One of the biggest transactions under IBC is the offer of Tata Steel for buying over Bhushan Power & Steel, requiring banks and other lenders to waive off about Rs 23,000 crore.
A major issue of concern to crores of people is the protection of their savings which are deposited in the banks. The Indian State, as the owner of the public-sector banks and as the public authority, is duty bound to protect the money that people have deposited with the banks. There is legitimate concern among the people that the State is not protecting the people’s interests. It is protecting the interests of a capitalist minority, headed by about 150 monopoly houses.
Comrade Venkatachalam, in his interview, criticised the Government of India for placing depositors’ money at risk. Referring to the Financial Resolution and Deposit Insurance (FRDI) Bill, he said:
“There is a clause in the Bill that if the bank faces liquidation, the government will not bail out the bank but depositors’ money will be utilised to bail it out. This is creating panic among depositors.”1
It is to be noted that when as many as 361 private banks failed between 1947 and 1955, lakhs of people lost their life savings.
Privatisation is a program aimed at fulfilling the greed of the capitalist monopolies, who want to gain direct control over lakhs of crores of rupees of people’s savings. Far from being a solution to the crisis of the banking system, privatisation is a recipe for even deeper crises.
The solution to the problem lies in reorienting the banking system and the entire economy towards fulfilling the growing needs of the people, instead of fulfilling monopoly capitalist greed. The means of large scale production and exchange, including banking, needs to be taken out of the hands of capitalist monopolies and placed under social ownership and control. The allocation of bank credit could then be based on an overall economic plan and not left to the profit calculations of monopoly capitalists and their representatives.
In order to implement such a revolutionary transformation, the working class needs to capture political power, in alliance with the peasants and all the oppressed. Only then can the economy be reoriented. Only then can secure livelihood and prosperity be guaranteed for all. The struggle against privatisation must be escalated with this revolutionary perspective.
1 Business Standard, 29 April, 2018