 Hello and let's talk about the privatization of banks. Over the past few weeks, we've got a clearer idea of the government's plans when it comes to the privatization of banks. The government seems to think it's fine to maybe have one or two state-owned banks while the rest can be privatized. There are the usual arguments laid forward that this will help the government earn money by selling its stake and that government banks are not efficient, etc. Now all of these arguments have been proved wrong multiple times but hey, who's listening? So today we talk to journalists on Indio Chakravarty and try to parse some of these arguments. Are private banks truly efficient? What advantage do we have with government banks? What is their social function? Here is what you have to say. Thank you for joining us. So we do have somewhat of an idea about what the government's plan is with regard to the banking sector, a large space open for privatization, maybe one or two government banks. And of course, this is nothing new, it's something the unions have been fighting for decades almost and the governments both BJP and non-BJP have been pushing for this as well. If you were to ask you what is the core argument against the privatization of government banks, what would you say? I would say it's the same Prashant that it was in 1970s when 51 years ago when banks were nationalized, which is before nationalization, there were broadly three things that banks did. Let's start with first of all understanding what banks do. They basically are a wire media for all the capital in an economy. So banks decide where that capital is going to flow. We save, banks create money when they create loans and they decide where that capital is going to flow. Some corporate houses controlled banks, they decided where to put it, a lot of money went into speculation, little money went into production. So society and the nation in a sense, the state or the public needed to control capital flows, that was the logic of nationalization number one. Number two, there was no, virtually farmers never got any loans. There were no loans being given, not only to other priority sectors, but to agriculture itself, and poor people had virtually no access to banking. Now we know that in the last 50 or five decades that banks have been nationalized. It's not as if that poor people have got too much access to banking, yes, or a large number now have accounts, it's not as if they're putting in money or getting money, but still branches have expanded in, in Kuzbaz, in small towns, some cases, even in villages. So that is the first thing that happened, right? And the overheads are high at such situations. So who's going to carry that? Private banks are not going to do it, and we know what happens when private banks are forced to do it. Then secondly, priority sector lending, private banks don't want to do it, they leave it to the public sector, they essentially want to give loans to, essentially depend on retail and personal loans, right? Which are easy or working capital loans, which are safer than giving project loans. Yes, they get into consortiums and then they give project loans and then they get into as much trouble as private sector banks do. And I would say that these are the three broad things which are the key behind maintaining government presence and banking. The state needs to control the flow of capital because we know the market is never able to do that, whatever the market fundamentalist might tell you. So in this case, of course, the classic arguments that are put, you know, presented every single time is that, oh, look at the NPAs, oh, look at government banks, they're not so efficient, et cetera, et cetera. So is there any, how do you address these arguments? Well, first of all, let's start with efficiency. It is true that when you go to a private sector bank and even I bank with a private sector bank, there's an AC, you can call your, you know, there are these help, the help customer service is easier. Maybe it's easier to get your ATM and your checkbook. But the point is that there are very few, they do have zero balance accounts, but poor people rarely get private sector accounts. So the cost that public sector banks bear, branches that they bear, they can't afford to give you very good AC. They can't afford to pay a lot to their employees. They can't put five people standing there to help you with signing a check. They can't do it because their costs are much higher, their overheads are much higher because they play a social role. So there is no doubt a degree of lack of efficiency. More of times you go, the computer's not working. They tell you to come tomorrow. But we also know that private sector bank ATMs don't work. You send your KYC letters five times and they don't, but our mentality in the last 30, 40 years has become that anything private sector, we say it's fantastic. We never say it is bad because it is private sector. We say this company is bad, but when it comes to government company, we categorically say it is bad. But by the way, in 2008, 2009, when there was a crisis, global financial crisis, I know many middle class people who shifted, went and opened their SBI account and shifted their money out of the private sector banks they were banking with because they were scared that if the bank fails, they're not going to get their money. But they were certain that whatever happens to SBI, the government will step in and save their money. So, you know, when it comes to trust, when it comes to trust, they all go to the public sector. And also, because there's also the question of NPAs, which people would say there's a lot of. Yeah, there are two parts to the NPAs. We know that NPAs are largely a product of a wrong economic policies followed by successive governments since the 1990s. It increased under the UPA's first tenure and continued, I would say to 11, 12 or even further. This is because there was an assumption that if you raise funds and spend, invest in these massive infrastructure projects, then you will create demand as well. But what they were spending on, major roads, power companies, mining, steel, ultimately, there was no domestic demand for it. The rate at which these power companies were going to sell power to be viable, no one was able, no one was going to be able to buy it at that rate. Infrastructure projects, the toll rates that they had to raise, the companies could not have those, they were still, so the concessions kept being extended. So therefore, we know there was an overestimation of India's boom, that growth will perpetually go on. Banks were carried away by that and I don't blame them. Everybody thought that in 2005, 2006, 2007 end, that this growth is forever. So they said, okay, I'm going to give you a 20-year loan, this is safe, I'm going to get money. India is going to be this massive growing company. This is an ideological space which determined policy, which determined the way the corporate sector went. And of course, there was corruption. So there were these netas and babus making phone calls and saying that this man is going to come, please assure that he gets a loan. And we know that at least 50% of those loans which have become NPAs are actually were siphoned off by big corporates. So it is actually money given to private sector which is the problem of the NPA. If the government had raised these monies from public sector banks and made, done these private infrastructure projects, we wouldn't have called them NPAs. They would have been somehow financed, right? From the budget or by borrowing from the RBI. It is because private sector projects doomed, fictitious in many cases that were financed, public sector banks were forced to finance them, that these have become NPAs. Absolutely. Private sector banks didn't do it. No one picked up a call and say, give so many corolls to Mr. Malia or to Nira Modi or whoever. So the point is that corruption caused by netas and babus to help the private sector. It is a result of privatization and not of government presence in the economy. Let us be very clear about that. When it comes to corruption and nepotism, we know that ICICI banks face these similar issues. It's India to design and go on allegations of, indirectly giving a loan to own family. We know they've been, look at what has happened to Yes Bank. Ultimately, it is SBI which came in to support it and save it. Look at what is the questions being raised about HGFC Bank, about its top management leaving, its inquiry that it has launched about its own autolone segment for vested interests coming into play, conflict of interest, sorry, coming into play and loans being extended and one of those credit agencies which collects credit information and then makes it public so that all banks can access it. They have recently informed the RBI. Of course, there's source-based information as reported by various news channels that HGFC Bank has not been providing details about its lending profile, who they're lending to in a retail space to these agencies. So the issues, questions of corruption, questions of vested interests, questions of conflict of interest, nepotism, they exist in the private sector as well. Exactly. And finally, of course, we do know that at this point, the government is definitely following a particular economic logic. It's not considering the views of those who are opposed to it. So what is in the short term especially likely to happen if some of these privatization projects do take off? I mean, you know what happened before the nationalization, of course, but what happens right now? Right now, you know, the point is that already private sector, whether they are in the private sector or not, the point is that the essence of banking has been changed. Public sector banks have been listed and they are being told that your profit and loss statement is the biggest thing. Who you're lending to, how you're lending your social role is not important. You should be profitable because otherwise you're a drain on the economy. All of this actually is, in a sense, giving up the social and economic role of public sector banks and directing the way the economy has to move. I mean, it is time for us to accept globally that the market has failed. It is a complete failure. It cannot deal with any external exigency like COVID-19. It cannot deal with its own bubbles that it creates. India's economic slowdown was not caused by COVID-19. It has only made it worse. That is true for most of the world. Despite that, we continue to follow the market's logic. We continue to follow neoliberal policies. We continue to say that Viral Acharya, former Deputy Governor of RBI, was quit after having a problem with the government. His argument is privatize healthy banks. Not even saying that loss making banks should be privatized. Healthy banks, good banks privatize them. Why? Because you should raise money so that you don't get into a fiscal trouble. This is typical fiscal fundamentalism, which is essentially saying sell your family silver for short term for fixing a leak in your tax. Ultimately, the aim is to hand over public assets, which is savings, the nation's assets, the nation's property to corporates, to some big corporate. And we are moving towards an absolute society where democracy is increasingly being completely ended and we are moving towards a complete supremacy of monopoly capital in this country. So that is where banking is going to go to. Thank you so much, Arunanthi, for talking to us. Thank you, Prashant. That's all the time for today. We'll be back on Monday with major news developments from the country. Until then, keep watching NewsClick.