AIBOC opposes govt move to merge public sector banks

'Ill-conceived plan can wreak havoc on India's financial mainstay'

The All India Bank Officers’ Confederation (AIBOC) has opposed the in-principle approval given by the Union Cabinet for setting up an “alternative mechanism” to oversee the proposal for consolidation of public sector banks (PSBs) to create fewer but stronger lenders. 

The AIBOC said it had repeatedly opposed the “ill-conceived” plans of the Central government, the Niti Aayog and the RBI to merge public sector banks and would continue to do so. These plans can “wreak havoc” on India’s financial mainstay, it added.

“We can well understand the fact that the merger of public sector banks is a part of the government’s broader plan to privatise the public enterprises to attract foreign investment. Already ICICI, HDFC, Axis which were in the public sector have become banks with high foreign holding. 

“The banks need capital for absorbing many of the losses out of stressed assets. It is very unfortunate to learn that the governor of the Reserve Bank of India (RBI) commented that the merger of banks would help in dealing with the problem of stressed assets of these banks, which is very immature and irresponsible on his part. It is a well-known fact that the NPA position of PSBs today is not the creation of the banks per se; rather it is to the lopsided policies of successive governments which virtually paved the way for sanction of big-ticket corporate loans to a handful of chosen borrowers, most of whom have turned willful defaulters.

“Further, hardly 5%-10% of the 6,32,000 villages have a bank branch of PSBs. The number of rural branches has been reduced from 54% in 1994 to 33% in 2014. Nearly 43% of the rural credit is financed by moneylenders and landlords, etc. The number of suicides of farmers for want of institutional credit at low interest with long repayment period is on the increase. Hence, the merger and consolidation of PSBs are sure to be detrimental to the interests of the rural poor, particularly farmers who are the backbone of the country.” 

The United Forum of Bank Unions (UFBU), which consists of nine unions, including the AIBOC, will launch a massive campaign against the merger of banks.