50 years since nationalization of banks
Nationalization is the process of transforming private assets into public assets by bringing them under the public ownership of a national government or state.
In 1949, during the early years of the country’s independence, India’s central bank, the RBI (Reserve Bank of India) became the first bank to be nationalized. This was an important move since the RBI would soon become the regulatory authority for banking in India. Most Indian banks at that time were privately owned. Thus, the Indian government then recognized the need to bring them under some form of government control to be able to finance India’s growing financial needs.
The Banks which were earlier in private sector were transferred to the public Sector by the act of nationalization. The first nationalized bank was Imperial Bank of India (under the SBI Act of 1955) and re-christened as State Bank of India (SBI) in July 1955. Despite the provisions, control and regulations of the Reserve Bank of India, banks in India except the State Bank of India (SBI), remain owned and operated by private persons.
By the 1960s, the Indian banking industry had become an important tool to facilitate the development of the Indian economy. At the same time, it had emerged as a large employer, and a debate had ensued about the Nationalisation of the banking industry. Indira Gandhi, the then Prime Minister of India, expressed the intention of the Government of India in the annual conference of the All India Congress Meeting in a paper entitled Stray thoughts on Bank Nationalization.
Thereafter, the Government of India issued the Banking Companies (Acquisition and Transfer of Undertakings) Ordinance, 1969 and nationalised the 14 largest commercial banks with effect from the midnight of 19 July 1969. These banks contained 85 percent of bank deposits in the country.Within two weeks of the issue of the ordinance, the Parliament passed the Banking Companies (Acquisition and Transfer of Undertaking) Bill, and it received presidential approval on 9 August 1969.
The following banks were nationalised in 1969:
Bank of Baroda
Bank of India
Bank of Maharashtra
Central Bank of India
Indian Overseas Bank
Punjab National Bank
United Bank of India
A second round of nationalisation of six more commercial banks followed in 1980. The stated reason for the nationalisation was to give the government more control of credit delivery. With the second round of nationalisation, the Government of India controlled around 91% of the banking business of India.
The following banks were nationalised in 1980:
Punjab and Sind Bank
Oriental Bank of India
New Bank of India
In the early 1990s, the then government embarked on a policy of liberalisation, licensing a small number of private banks. These came to be known as New Generation tech-savvy banks, and included Global Trust Bank (the first of such new generation banks to be set up), which later amalgamated with Oriental Bank of Commerce, IndusInd Bank, UTI Bank (since renamed Axis Bank), ICICI Bank and HDFC Bank. This move, along with the rapid growth in the economy of India, revitalized the banking sector in India, which has seen rapid growth with strong contribution from all the three sectors of banks, namely, government banks, private banks and foreign banks.
The next stage for the Indian banking has been set up, with proposed relaxation of norms for foreign direct investment. All foreign investors in banks may be given voting rights that could exceed the present cap of 10% at present. It has gone up to 74% with some restrictions.
DIFFERENT SECT OF BANKS
The Indian banking sector is broadly classified into scheduled banks and non-scheduled banks. All banks included in the Second Schedule to the Reserve Bank of India Act, 1934 are Scheduled Banks. These banks comprise Scheduled Commercial Banks and Scheduled Co-operative Banks. Scheduled Co-operative Banks consist of Scheduled State Co-operative Banks and Scheduled Urban Cooperative Banks.
Payments bank is a new model of banks conceptualized by the Reserve Bank of India (RBI). These banks can accept a restricted deposit, which is currently limited to ₹1 lakh per customer. These banks may not issue loans or credit cards, but may offer both current and savings accounts. Payments banks may issue ATM and debit cards, and offer net-banking and mobile-banking. The banks will be licensed as payments banks under Section 22 of the Banking Regulation Act, 1949, and will be registered as public limited company under the Companies Act, 2013.
There are six payments banks
Aditya Birla Idea Payments Bank Ltd.
Airtel Payments Banks Ltd.
Fino Payments Bank Ltd.
India Post Payments Bank Ltd.
Jio Payments Bank Ltd.
PayTm Payments Bank Ltd.
NSDL payment bank Ltd.
SMALL FINANCE BANKS
To further the objective of financial inclusion, the RBI granted approval in 2016 to ten entities to set up small finance banks. Since then, all ten have received the necessary licenses. A small finance bank is a niche type of bank to cater to the needs of people who traditionally have not used scheduled banks. Each of these banks is to open at least 25% of its branches in areas that do not have any other bank branches (unbanked regions). A small finance bank should hold 75% of its net credits in loans to firms in priority sector lending, and 50% of the loans in its portfolio must be less than ₹25 lakh (US$38,000).
There are 10 small finance banks
AU Small Finance Bank Ltd.
Capital Small Finance Bank Ltd.
Equitas Small Finance Bank Ltd.
ESAF Small Finance Bank Ltd.
Fincare Small Finance Bank Ltd.
Jana Small Finance Bank Ltd.
North East Small Finance Bank Ltd.
Suryoday Small Finance Bank Ltd.
Ujjivan Small Finance Bank Ltd.
Utkarsh Small Finance Bank Ltd.
Apart from this there are RRBs, Cooperative Banks, Foreign Banks with branches/representative offices in India and Local area Banks. As on 31.3.2018 the Indian Banking Industry have a total of 143999 (51030 rural branches ,40166 semi urban ,25655 urban and 27148 metropolitan) in India and also have branches abroad .
Though all these developments happened in Banking Sector, it is through PSB s the Government implements their various schemes. The various social schemes executed through PSB s recently are
And for information
As on 3.7.2019–>74729 accounts were sanctioned &Rs.14431.14 Cr was disbursed under Standup India Scheme
During FY 2018-19 -> 28108814 Mudra loans were sanctioned amounting to Rs.1,48,503 Cr and Disbursed Rs.142009.91 Cr
Under PMAY , upto Feb 2018, 10609 Cr amount was disbursed
Under PMJJBY ,upto2.7.2019 PSB s enrolled 6.08 Cr citizen and settled 60422 claims.
Under PMJDY, started 36.06 Cr as on 3.7.2019 with a deposit of Rs.100865.94 Cr.
Under APY ,PSB enrolled 1,67,60,281citizens
Under PMSBY, Enrolled 15,99,18,378 citizens
Issues faced by an ordinary employee of PSB
According to the Government, The Banking Companies(Acquisition and Transfer of Undertakings)Acts of 1970 and 1980 provides that the Central Government, in consultation with the Reserve Bank of India (RBI), may make a scheme, inter alia, for the amalgamation of any nationalized bank with any other nationalised bank or any other banking institution . Various committees, including Narasimhan Committee (1998) constituted by RBI, Leeladhar Committee(2008) chaired by RBI Deputy Governor, and NayakCommitte (2014) constituted by RBI, have recommended consolidation of Public Sector Banks (PSBs) given underlying benefits/synergies. Taking note of this and potential benefits of consolidation for banks as well as public at large through enhanced access to banking services, Government, with a view to facilitate consolidation among public sector banks to create strong and competitive banks, serving as catalysts for growth, with improved risk profile of the bank has approved a framework for proposals to amalgamate PSBs through an Alternative Mechanism (AM).
The following amalgamation/mergers has already happened in India after the era of Nationalisation and some more are in pipeline as reported by media. This creates stress for the employees , where they are scared about their existence and job security.
Banking sector is back in Red in Q4 of 2018-19 with a loss of Rs.20,817Crores. In 2017-18 banks had reported a massive loss of Rs.85000 crores as per RBI circular in February 2018 . This has forced lenders to make provisions for bad loans and cleaning up of their books. This year’s provisioning is mainly due to provisioning for ILF&S, Jet Airways and Reliance communications of Anil Ambani Group.
Actually, till such a time a project is commissioned as per the approved schedule ,Banks should not be forced to categorize such project as NPA . In the event of classification of Big Ticket Advances as NPA, as per laid up norms Government should pro-actively help the banks in realizing the public money . The Government should initiate steps to declare suomoto 50 top NPA of each banks as wilful defaulters and to publish their names and photos.
DRT or NCLT are not in a position to reduce NPA accounts turn around due to multiple factors. And for implementing SARFAESI provisions , many bank officers are targeted , even personally. By merely targeting the Bank officers responsible for executing the Act, The Political Fraternity is missing the point to bring amendments to the Act itself. Since Realizing NPA Recovery on Big Ticket Advances are a humongous challenge, The bottom line of the Public Sector Bank in terms of Profitability continues to be in the negative. On Account of this, Un reasonable amount of Work Pressure and Stress are mounted on desk officers
Apart from all these, Personal issues like work—life imbalance depriving employees of bare minimum quality time at Home, Irregular working hours, Stress on account of financial risk in routine work schedules,, Other Technical problems of software, IT related issues further adds fuel to the worries of the already traumatized Bank Employee. Desk level employees who merely pass vouchers are mostly made scapegoats on account of Frauds happening in Banks involving high technical expertise.They are the ones who face the music leading to CBI enquiries . In many cases , Their retirement benefits are with held. Many are arrested and are not aware as to why the arrest is happening in the first place. This leads to Suicide which has become a common phenomena
Social banking v/s profit making
As per Sec 5 of Banking Regulation Act,Banking means “Accepting , for the purpose of lending and investment of deposits of money from public, repayable on demand or otherwise and withdrawal by cheque, draft, order or otherwise”. However sale of Parabanking products and implementation of govt schemes takes away the lionshare of working hours of an average PSB employee. As mentioned earlier when the balance sheet turns red, all blames are shoved on the desk level officers for non-profitability/ Non-Performance
Though the public sector banks are helping government for implementing their schemes for social cause, In the public sector banks pay revision takes place on the basis of bipartite settlement. Though PSBs act as the tool for improving the life of common man by helping Government for implementing their schemes, for wage revision, the question of profitability arise. The settlement takes place between Indian Banks' Association (IBA) and United Forum of Bank Unions (UFBU). IBA is representing bank managements while UFBU is representing officers, employees, and staff organization. This time the Charter of demands had been submitted in a time bound manner and IBA had agreed to complete the process of negotiations expeditiously within the time frame so as to reach the settlement before October 2017. However since 5 major Bank Managements have not given full mandate for negotiating wages upto scale VII , AIBOC is not participating in the talks now. AIBOC ‘s demand is to do unconditional wage revision upto scale VII as had been the practice. Unfortunately, There is no Employee Representative in many of the Bank’s Board to push forward the bare necessities
At a Point, Where The Banking Fraternity will be celebrating 50 Years since Nationalization, We are sure that each employee will be proud for the big achievement which ofcourse has contributed to the Nation Building, However certain basic issues close to the Bank man’s Heart are yet to realize redressal.
(The author is asst gen secy, Ernakulam Region, IOBOA, State Vice President, AIBOC, Kerala and national executive committee member, AIBOC)