 Hello and welcome to NewsClick. The privatization of banks is a controversial move which the government has suggested in the budget and it is likely to come up in the next parliament session. We have with us Thomas Franco, who is with the People First, an organization which supports the public sector. Welcome to the show. Thank you. You know, why is it that the government is looking to privatize banks? What does it mean in 52 years of nationalization? Are we reversing a process? What does it mean for employees? See, number one, it was the earlier avatar of BJP, the Jansank, which was the only organization which opposed nationalization. Okay. 1969, they opposed it in the parliament and they also went to the court. So they have that same ideology. The Prime Minister keeps talking about the government has no business to be in business. So they want to hand over everything to the car ferrets. Who are their supporters? The car ferrets, who are supporting them in elections, through electoral bonds and all. Now it is their way back time. So they are expecting that one by one, if a public sector is sold, if a public sector banks are given to them so that they can have the freedom. For the employees, practically, they may not have anything to lose because normally they will say that we will retain you for the time being, we will not send you out and all. But it is if public, they are going to be affected much more. How is it going to affect? See, number one, now itself, the public sector, character of the banks are getting changed. Once they allowed this investment, for example, state bank at one point of time, it was almost 100% government owned. Now it is only 55%. So there is a shareholder director. There are representatives of the shareholders. So they look at the shareholders' interest more than the customer's interest. So slowly in the banking sector what has happened is that the large credit has increased. Now as on March 2021, if we see as per the RBA data, 30.6% of the loans have gone to 11,000 odd persons. Total 30% of the total loan that is almost 100 crores. Total loan outstanding is around 100 crores. The small credit which was at one point of time, if you see the data of 1980, the small credit was 97.6% of the total credit in number. So the position has exactly reversed. Yes, now it has come to 30%. So the customers are as such getting affected and once privatization takes place, you won't have access to education loan. You won't have access to housing loan. You won't have access to MSME loans. You won't have access to micro-credit. Even the SIGs will not. Because the banks will start focusing only on profit and they will focus on the larger credit instead of small credits, which is easy for them. That is how the customers are going to be affected. And public sector banks today have more than 80 crore customers. Right. And each one of them are going to be affected and this is only a beginning. One of the things that the government has said that they will try to privatize two banks. But they have not said which banks. And it's also not clear whether there are buyers in this position. So what we are calling privatization, now is it actually corporatization? Exactly. See privatization will say there are many things good in the private sector also. But here what is aimed at is handing over everything to the corporates. You are seeing already in the other sectors. Air India has gone to Tata's, 12 airports and 12 ports have gone to Radhani, Ambani, Reliance is almost a monopoly today in telecom, in Follister filaments. Like that the different sectors are being sold. Now in the case of the banking sector when they are initially they said two banks and Nithya Ayog says that we don't require so many banks. Yes. We require only five, six big corporates in this country. That is enough. That's what Amitabh Khan says. Now in the banking sector initially they said it will be two big banks. Then later on they said one big bank, one small bank. So till date we don't know which are the one. Though in the media it has been said that it may be Indian overseas bank and the Central Bank of India. The name does not matter. The purpose with which they are trying, once they succeed in privatizing two banks that is if the resistance is subsided then they will go for other ones. And already the demand of the US Treasury, two Secretary of State had already approached our government at different times saying that first you privatize state bank of India, biggest bank so that it is visible that you are willing to take on privatization. Just interestingly the government would be interested to keep SBI with itself because they also indicate sometimes that they want a foot in that the biggest financial player. They don't want to quit the financial sector altogether. I don't think that is correct. Though they keep saying that yes we will have one. Yes. If banking is also in the strategic sector we would like to see. They have already announced that ICIC is also a strategically important bank as much as State Bank of India. And they allowed Reliance and SBI to come together in the Reliance Payment Bank. 30% share holdings is by the State Bank of India and State Bank of India has got nothing in return so far. We don't even get their balance sheets published in time. I don't think they have really gone into banking but they are only creating a record that we are already having banking expertise so that they can take over banks. Okay. And already RBI had published a paper that... Yes, I was going to ask you. Yes. Corporates can be given entry. Earlier RBI had always been taking a stand that corporate should not come in and the purpose of nationalization when Mrs. Gandhi announced it on 19th July 1969. One of the primary objective was that there should not be hold of business houses in banking sector. Which was exactly why we did nationalization. Yes. The nationalization the purpose was one is to have larger outreach to the rural areas. Small credits to sectors like agriculture, small industries. See when nationalization took place the data shows that only 2% of the total credit was going to agriculture including large agriculture. But today 18% goes to agriculture. 40% priority sector lending is there. So that time they said that we should reach banking services to the common man. Especially in the rural semi-urban areas and also in so-called Vimaru states that is weaker states including Bihar, Mathya Pradesh and all where adequate number of branches were not there. Then they brought in a criteria that every block headquarters should have a bank branch and they implemented it. But today once again number of branches are getting reduced after the merger. So the entry of reliance into state bank through the payment bank and reliance having its own asset reconstruction company that is all to put it on record that we are already in banking so that they can take over an existing bank or they can start a new bank. Whereas it will be easy for them to take over instead of taking something new it will be much more difficult. So I have a very strong fear that they are at it that once privatization is allowed they will quickly take over state bank of India. Sometimes there is a complaint against the public sector banks even other banks that you know they are difficult for the customers to deal with long lines etc which you just mentioned. Is this a good reason why the government should consider privatizing? See we should see what is the root cause of this complaint. Number one the government itself had put an embargo on recruitment for almost 10 years there was no recruitment. Then they gave a VRS in which little more than one lakh people left the banking industry. So number of staff got reduced naturally the service gets affected. Similarly in 2015 they had the demonetization. All the faith in the banking system was gone your own money you couldn't take back. But that policy was of the government it was a decision why is it that the banks took the blame for it. See the foreign ordinary customer they don't know who is responsible. The prime minister says that it is good for the country. Just stand with me for 15 50 days everything will be all right otherwise you can take action against me and he wanted to show that yes I can I am a strong man and I am willing to take risk and the customers are looking at only the counter clerk. This fellow is not giving me 2000 rupees. I have deposit of one lakh. Suddenly they said you can take only 4000. Some days it was only 2000. Some days it was 2500. Some days nothing. Then they said that you should bring this ink indelible ink so that you are not taking the money same day many times all that it was all a big tamasha going on and people when they could not get their own money back till date neither RBI nor the government has said under which act or law they had the power to say that you cannot take your money and the RBI governor has a duty under article 300 A he is responsible for safeguard of the public interest of the money and the RBI governor signs the promise to pay but that money was not given even now there are some people holding some notes they are not able to take back so naturally the faith in the system got affected and it was mostly the public sector banks where the ordinary people were going for exchange and they also did a wrong thing I have stated it openly in the media at that time the private banks were given new currency more than the public sector bank so they were favoring some one thing I would like to point out here is that that time Mr. P. Chidambaram was former finance minister and home minister made a statement I am not the supporter of Chidambaram or his policy but he made an important statement say that I have doubts that large amount of fresh currency has gone to the hands of some individuals without going through the bank and they kept discovering this was true yes so what was that I know of 155 cases which were reported widely in the media and not a single person is behind the bar today all those people for a day or few days they were arrested they are all back into business including farmers chief secretary of government of Tamil Nadu a big contractor called shakarity in whose house they found huge amount of fresh currency nothing has happened so the system failed everybody knew that it is not going to address what they promised either the black money nor the counterfeit currency nor the terrorism nor even the digitalization today hey that's right see that time there was only 16 lakh crore currency in circulation in october rba data shows that now it is 29 lakh crores yes so some of them might be in the also unaccountable also so the demonetization had a dent on the banking system particularly the public sector yes the public sector banks customers were happy not happy subsequently now what has happened is that after the merger number of branches are getting reduced number of employees are getting reduced so the customer when he goes inside the bank he has to wait for getting a loan he is waiting for months so there is an anchor how this has to be corrected is by increasing the number of branches and increasing the number of staff I'll quote a data even today per employee a per branch population of bank branch in the country including private banks is 11000 okay whereas if you look at our own neighbors the developing countries average is 5000 so here we require at least double the number of branches today who can open that in the rural areas it can be only the public sector one after so many years of bringing in so many private banks and you promoted ICIC was promoted by the government axis was promoted by the government as DFC was promoted by the government and all our private sector now and most of this private sector banks large holding is by foreign institutional investors in the HDFC case I think 54 percent is foreign investors so one side you are talking about at Manilbar self-reliance and all but you are handing over things to the foreign investors now here the banking sectors difficulty is that the reach in the rural areas has gone down because of which customers are unhappy will privatization solve this problem definitely it will not solve the privatization the the whole concept of private sector is profit it is not service that is why you require the public sector banks one of the other things is that we often hear that you know the public sector banks are you know giving loans which they shouldn't there are things going wrong etc etc but have what kind of regulatory action have you seen against those instances where the private sector banks have let down the customers see there are two aspects in the case of public sector banks you have a lending policy prescribed by the Reserve Bank of India through the Department of Financial Services they tell you were to focus now you are seeing practically almost every two months in the finance minister is meeting all the chiefs of the public sector banks and she is saying that you conduct loan Mela right you give more Mudra loans you give more PM swanidhi loans yes and the banks have to follow because the ownership is with the government so they have to listen to the government directives so what happened after 1990 was that the policy got reoriented the focus from small credit it shifted to the large credit development financial institutions like IDBI was converted into a bank commercial bank so the space for development financial institutions which were doing the long longer time credit 15 years 20 years credit they were giving that was focused on the public sector bank so public sector banks had to lend to the corporates all this PPP public private partners it is there is nothing private everything is coming from the public sector banks and they don't have any other sake the private holders they just bring some balance sheet right and it is the banks which are lending see when that started it was the government which said that you lend to the steel sector to the power sector supporting privatization of power industry that's right and there is where the large NPA came and now also what they are doing they brought in the national company law tribunal through the insolvency bankruptcy code and in the name of haircut so much of amount is going away right one small example is Anilampani's company is sold through the NCLT to Mukeshampani and the haircut is 83 percent right similarly we have seen with the case of Vedanta Agarwal taking over videocon group that's right so and average recovery is not even 50 percent and case by case we analyze larger the loans the larger is the right of so the non-performing asset is not created by the banks it is not created by the small borrowers like the agriculture borrowers or education loan borrowers it is the corporates where the lending policy itself prescribes that you don't have to take so much of collateral security you go for a housing loan what we do we ask you to mortgage the house so entire property is in our hand but in when you are lending to a corporate it is based on a balance sheet that's right and some rating agencies and they don't have collateral to support so naturally when the loan goes back you don't have a fallback mechanism so what has been recommended by the parliament standing committee in 2016 February headed by Mr. Veera Fomili that time was that let the corporate go to the market and this is the funds for themselves yes they can issue bonds they can issues shares that way the they claim themselves to be efficient yes so let them mobilize from the market right but that's not happening it is only being the public sector banks continued to lend to them so this has created that unhappiness the banking policy it was not created by the public sector banks and private sector banks had been very careful in avoiding long-term finance they were concentrating on only retail lending housing loan personal loan where they could get the recovery that's right and again the Jan Dhan accounts so when it comes to actually creating long-term assets for a country or actually building up the ability of people to launch a business or do their education we need public sector to be there for that exactly see even the latest government schemes the mudra loans who has given the maximum loans it is the public sector banks education loans except study abroad private bank will give but any study within the country no collaterals it is public sector bank microcredit a surgery lending who is doing public sector banks are doing and msm is you look at msm is the largest number of loans are given only by the public sector banks and again one more thing is the Jan Dhan accounts that's right they wanted everybody to have an account one is that there is a jumlah when the number of accounts reached just 10 crores the prime minister and bjp climbed that they have reached all the households now they are saying 43 crore Jan Dhan accounts are there so who is this poor who has been given more that is a mistake but still if you look at the total number of loans out of this 43.5 crore so far 97% of the accounts are opened by the public sector banks just only 3% with the private sector which shows what will be the kind of exclusion if the government's plans exactly once the privatization if it happens small people will not have access to even opening an account leave alone credit they cannot even open on the accounts they will have to close this account they will many private banks if the minimum balance is 10,000 rupees they will fall out of the banking yes so the entire banking accessibility will be gone for the customers at large the large number of middle class lower income group they will be the ones who will be very badly affected all right thank you very much thank you for sharing this information with us thank you very much for watching news click please watch us on youtube and join us on facebook and twitter