According to AIBEA, if private payment banks are allowed to collect deposits, then the cost of banking services as well as interest rates on small and priority sector loans in public sector banks will go up
All India Bank Employees' Association (AIBEA) has opposed the licensing to payment banks in private sector, calling it an anti-public move. "The Government is trying to dilute public sector banks (PSBs) and boost private banks in the name of banking reforms," says CH Venkatachalam, General Secretary of AIBEA, in a release.
Earlier this week, the Reserve Bank of India decided to grant "in-principle" approval to 11 entities to set up payment banks. These includes, Aditya Birla Nuvo Ltd, Airtel M Commerce Services Ltd, Cholamandalam Distribution Services Ltd, Department of Posts, Fino PayTech Ltd, National Securities Depository Ltd, Reliance Industries Ltd, Dilip Shantilal Shanghvi (Sun Pharma), Vijay Shekhar Sharma, Tech Mahindra Ltd, and Vodafone m-pesa Ltd.
Mr Venkatachalam said, "At a time when Government wants to ensure that banking services reach everyone, the need is to strengthen and expand public sector banks which alone take care of the concerns of the common people and their banking needs; as such private banks are being encouraged. We know the history of such small private banks in the past which have cheated public savings and vanished from the scene. In India savings of the people is an import of the social capital and one cannot afford to play with this. Public savings should be fully regulated and controlled by the Government in the interest of our country and the common masses."
According to the bank employees' union, the move (to allow payment banks) is nothing but a direct attempt to boost private sector banking and to minimise the role of public sector banks as well as to reduce the market share of public sector banks. "Public sector banks in India have done yeoman services in changing the banking profile and transforming from class banking to mass banking. Our economy was saved from global financial and banking crisis only due to the reason that our banks were insulated by Government-controlled public sector banks. Our strong banking regulations helped in sparing the country from a major financial disaster. But in the name of banking reforms the Government is trying to dilute PSBs and boost private Banks," it said.
Raising the issue of increasing non-performing assets (NPAs) in PSBs, Mr Venkatachalam said, "Because of the colossal private corporate delinquency, public sector banks are saddled with huge bad loans of nearly Rs6 lakh crore. As on 31 March 2015, there are 7,035 cases of wilful defaulters, involving bad loans of Rs58,792 crore. The bad loans in the banks as on 31 March 2015 has risen to Rs2,97,000 crore excluding another Rs4,03,004 crore of bad loans of 530 corporates shown as rescheduled and restructured loans under the corporate debt restructuring (CDR) scheme. Bad loans struck up in top 30 borrower accounts of PSBs as on 31 March 2015 is Rs1,21,162 crore."
"All these are private corporate companies who had defaulted (PSBs) and it is strange that RBI and Government want to encourage the very same private sector to start banks? Further, because of the thinning of margins and profits, Banks are striving hard to fetch low cost deposits like savings and current account and every bank is concentrating on current account and saving account (CASA) deposits as the main route to improve their cost of funds and profitability."
"CASA Deposits/ Savings deposits of the common people are like oxygen to the Banks. At this juncture, giving license to such private companies to start payment banks whose main job is to collect savings and current account deposits will cut at the roots of the public sector banks," Mr Venkatachalam added.
According to AIBEA, if these private payment banks are allowed to gather the savings and current deposits of the people which are of low cost, public sector banks will be deprived the same and hence the cost of banking services in PSBs will increase and rate of interest on small loans and priority sector loans will also go up. Allowing such Banks in the private sector is anti-public sector banks and in the long run anti-people, it said.
Opposing the move, the bank employees union has urged the government to stop this policy. AIBEA said it will write letters to the RBI Governor and Finance Minister requesting them not to go ahead with the policy.