The NTUI stands in solidarity with the All India Bank Employee Association (AIBEA) and the Bank Employee Federation of India (BEFI) that are on strike today, and fully supports their opposition to government’s decision to merge 10 existing public sector banks (PSBs) to create 4 larger PSBs.
Bank employee trade unions have vociferously opposed the merger of these PSBs. They state that merger will lead to closure of branches citing the near 7,000 branches shut down after the merger of the State Bank of India with 6 other banks. Branch closures would curtail access to affordable banking services, reduce employment creation in PSBs and lead to mass retrenchment of the workforce. It may even lead to contractualisation of the workforce via the spread of bank correspondents to compensate for closed branches. Both the AIBEA and BEFI have denounced the merger as an effort to divert attention from burgeoning bad loans in the banking sector.
The NTUI understands that the crisis in the banking sector will not be resolved through merger. Many bad loans are a result of political interference in PSB lending but an equally large share is due to the economic slowdown spreading across the country. Accentuated by government actions including demonetisation and the introduction of the Goods and Services Tax, falling output and revenue across sectors has forced many firms to reduce credit intake and even default on loans taken. For example, the real-estate and construction industry, often considered an important driver of economic growth, has been collapsing with the number of firms going insolvent doubling since September 2018. At the same time, a large number of housing units are remaining unsold across cities, with some estimating the value at near 5% of GDP. This is causing wide-spread default of loans taken by real-estate and construction firms from both banks and non-banking financial corporations.
The bad loan recovery process via the Insolvency and Bankruptcy Code, though focused solely on recovering the financial value of loans and with little concern towards maintaining employment or productive capacity, has proven to be time-consuming, cumbersome and ineffective. PSBs have been forced to accept massive losses when writing off bad loans and the recovered amounts are significantly less than the amount lent.
These losses alongside expenditure incurred on poorly conceived and anti-people government schemes like direct benefit transfer, aadhar-linking and financial inclusion, not to mention demonetisation have forced PSBs to cut depositor interest, increase user charges and penalties, all measures that affect small depositors the most, in an attempt to maintain operational profits.
The bad loan crisis has left most PSBs in dire need of recapitalisation which the fiscally conservative government is loathe to do. This proposed merger is a banking sector variety of what is occurring among other public sector undertakings (PSU) where profitable and cash-rich PSUs are being forced to buy up loss making ones. Doing so allows government to meet divestment targets despite lack of private investment while at the same time bolster revenues and maintain the fiscal deficit despite tax cuts, falling tax collections, etc. Merger of PSBs will additionally allow government to shirk the responsibility for recapitalising PSBs. These measures, whether among PSBs or other PSUs, contain no benefits for working people.
The NTUI condemns the merger and fully supports the striking unions. The NTUI in support of the bank employee unions demands that government desist with the merger and discuss the matter with the trade unions.