prpri The Dark Side of Privatisation of Public Sector Banks The Dark Side of Privatisation of Public Sector Banks

Dear Readers,

You might be aware about the recommendations of the Niti Aayog to the central government about the privatisation of few Indian Public Sector Banks.

Currently, the talk about the privatisation of 3 public sector banks namely, Punjab & Sind Bank, Indian Overseas Bank and Bank of Maharashtra is in the air.

So, after reading that news I was thinking about the 3 major things:

  • Government’s Intention
  • Benefits of privatisation
  • Problems occurring after/due to the privatisation

If you Google about the same, you will find so much information in context of the 1st two points to which I usually say the brighter side of some action plan but unfortunately, nobody usually cares about the 3rd point which is the darkest side of the action plan and I personally fear about the revolt due to these kind of proposals.

So, in this article we will discuss about the poor impacts of these kinds of actions.

Injustice with Lower Class:

The first thing I was afflicted with, is the thought of people belonging to the lower class of our nation as on the one side our government had run the massive promotional campaigns for the opening of bank accounts by the poor in the form of “Jan Dhan Scheme” and they were informed about the benefits. Though the scheme was not purely focusing on the opening of accounts in the public sector banks but it is quite obvious that the person belonging to the poor class is more conscious about his money and he relies more on the government banks than any other private bank. Now the same banks are going to be the privatized. Isn’t it the injustice with those bank account holders?

Injustice…..? Don’t wonder about the usage of this word as now I am going to show you something:

“Indian banking sector was earlier in private hands. However, during the 1970’s, the Indian government was of the opinion that banks favor the rich and that the poor must also be given access to cheap credit. With this view, several banks were nationalized. It is a huge irony that the banks which were nationalized based on pro-poor agenda are today facing mounting losses because they have loaned out huge sums of money to the rich without proper diligence.”

(This statement has been extracted from the article published by Management Study Guide)

The above statements are literally bawling as the same are depicting the two issues:

The first one says that the banks were in the private hands in the past and due to the ignorance of the poor class of India by these banks, the banking sector was nationalized. So, it means that the government is well aware about the dark side and it is going to ignore the poor again. So, should I say that government is ready to leave the poor in the lurch?

The second one says that after the nationalization of these banks in the 1970s, the so called public banks had given the huge loans to the rich without proper diligence and yes we can still witness the marks of the high class defaults which at the end put the burden on the middle or lower classes of India in the form of cuts and fines.

I personally believe that this is the result of the government’s unsustainable policies in the past which could not revive the Public Sector of India.

Now, again If the government is thinking of going back in the era of 1947 to 1970s, then what’s the point in blaming the opposition as this was what they had continued for almost more than 20 years in the past and if they are privatising the banks because of the decision of nationalization of the ruling govt. of that time then they should also look into the reasons for the same.

My only question to the government here is, “Do it ensure that this privatisation will focus on the lower class of India?”

Well, I don’t think so as if as per the current situations, the banks are more lower class focused than definitely the privatisation is going to be the opposite because the main reasons behind this action is to bring the banks back in the state of profitability.

Okay, so the above was the first arm of my discussion. Let’s proceed to the next.

The Employees:

We are in India and it is a land of dreams of the Government Jobs. The youth of India is more dedicated towards the accomplishment of this dream as compared to anything else.

Just imagine: A person after scrambling for 2-3 years got the job in one of the above mentioned banks and within few months or I should say few days, he got the information that his bank is going to be de-nationalised. Now just try to imagine the state of mind of a person who had dedicatedly achieved a dream and now that dream has spoiled his life completely. From the category of a fully secured job, he has been shifted to the fully unsecured category and for the instance, we can rely on a fact that yes the employees will not be sacked out from their jobs but then what about the monetary benefits?

A person applies for a government job for 2 main reasons:

First, the fully secured job and the second is handsome pay with monetary benefits.’

Again, my question to the government is, “Do it ensure that this privatisation will not affect the employees on both the above mentioned aspects?”

Well, again I don’t think so as the problem with the public sector is the lack of finances and privatisation is intended for correcting this situation.

So, if a company will pay to buy a bank then definitely its first step will be stepping into the shoes of a price cutter which automatically points out the finger towards the employees.

During the discussion with one of my friends, who is a Bank Employee in one of the PSB, he stated that there is a state of helter-skelter in the group of employees that this privatisation is going to impact their future in the following two ways:

  • Employees who are employed for more than 20 years will be given the benefit of VRS.
  • The other ones will get 70% of their current salary and the remaining 30% is going to be variable which will be purely based on the targets.

I do not authenticate the above two points as I didn’t find anything about the same on record. May be it is the result of the muttering due to the state of apprehension but yes these things may happen.

So, the above two things i.e. the focus on poor class and the focus on employees are the darkness which our nation will witness if these proposals of privatisation will be given the shape of action.

Why Privatisation instead of Self-Realisation?

Here, I want the government to think from the perspective of a private company instead of selling themselves to the private sector.

There is a strong need of high class Internal Control mechanism in these banks with an intention of taking the banks out of this financial crisis.

Selling or Privatisation is not the ultimate solution. There are 2 sides of a coin and therefore, decisions cannot be taken on the basis of the upper side only.

Rest is all up to the government.

So, what’s next……..? Railways…..?

Just hoping for the best.

Thank You.

The author can be contacted at or whatsapp at 9888855340.

Author Bio

Qualification: CA in Job / Business
Company: PwC AC Kolkata
Location: Panchkula, Chandigarh, India
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  1. Pat says:

    Mr Rawat,

    Totally Approve ur views on privatisation of PSUs.. but…. Stating Agriculture as disguised unemployment.. sounds like a bad thing.. and if so.. is incorrect.. Hope ur perspective changes some day… Farming as a profession is not a bad thing… Only not stopping the pensions for the guys found guilty of these loan scams is bad….

  2. Prashant says:

    I would like to reply to Mr Rawat about hdfc bank. My personal experience with hdfc is bad. Hdfc didn’t pay lumpsum amount to people who buy their policy. That means they never pay what they promise. Most of the people are ignorant about getting monthly payment of their what do you call it about a policy, whatever. Thus they become 2 nd by cheating not by honesty. This is my personal experience.

  3. Charan Rawat says:

    19Bank nationalisation had nothing to do with the pro-poor steps to be taken. It was purely a political move. Even as early as 1960, RBI had issued direction to banks to start opening branches in rural areas. Please do remember, banking is a business. And given economic conditions of India in 1960, opening branches in rural areas – which had little surplus and low credit opportunities – banks were obviously slow in spreading out in rural areas. Garibi Hatao rhetoric led to bank nationalisation.
    With government as the owner, banks were no longer a commercial entity but a departmental entity operation under whims and fancies of political directions of Finance Ministry.
    With no economic incentive and control, the massive outreach was bound to result in the credit losses.
    In 1990 around liberalisation, financial condition of the banks was such that most would have bene wound up if they were in international markets. But with implicit guarantee of GoI, they continued.
    Current status of banks owes as much to the delinquent borrowers – crony capitalists – as much to absolute lack of knowledge of banker fundign these mega projects. A Thermal power plant funded @ Rs 10 crores a megawatt when global costs are less than Rs 5 crores a megawatt. Were these bankers not supposed to do their due diligence.
    During last 10 years, instead of receiving dividend from banks, GoI – which is the largest investor in these PSUs – has funded over 350,000 Crores as capital so these inefficient banks can continue. This funding is through borrowed monies and considertign even a low cost of 6%, this capitalisation has cost GoI and us tax paers Rs 21,000 Crores a year. MNREGA budget by the way is barely 80,000 crores. We should much rather divert these 21,000 crores to MNREGA rather than keep these bloated banking bureaucracies alive.
    Are we supposed to provide doles to these bankers who can not do their job efficiently ? Why HDFC Bank is today more valuable than SBI ? How it has become 2nd largest bank in India ? HDFC Bank is barely 30 years old.
    Don’t bleed your heart under rhetoric of serving the poor. Agricultural India contributes barely 16% of GDP. Any amount of banking and credit is NOT going to ameliorate its condition unless people are weaned way from disguised unemployment in agriculture.
    A more efficient use of capital will go long way in helping everyone in economy. Except the iron bowl employment, guaranteed inflation indexed pension of these sloth PSU bankers

    1. Arvind says:

      This tym whenever u go to PSB branch plz get only one data … many ac they have a…and how many staff they have for that ac … offer this dirt cheap service they are sacrificing their peace of mind …even this is true

  4. Uma says:

    It’s worth to prepare for bank job sir or I can move to IT sector job I am asking this because of bank privatisation and I am computer science graduate please reply sir

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July 2021