The AIBEA said the move will make it more difficult for public sector banks to lend to weaker and priority sectors at concessional rates of interest
New Delhi: Bank unions under the umbrella body AIBEA on Wednesday opposed the government’s decision to allow all private sector lenders in the government-related business, saying it was “unfair” and “to the disadvantage” of public sector banks (PSBs).
The finance ministry, in a statement, said all private sector banks can now participate in government-related businesses like the collection of taxes, pension payments, and small savings schemes.
At the moment, only a few large private sector banks are allowed to conduct government-related business.
“It is like feeding milk to the poisonous snake,” the All India Bank Employees’ Association (AIBEA) said in a release.
This government decision to give equal treatment to private banks is unfair and to the disadvantage of public sector banks, it added.
The private sector is the main contributor to banks’ huge bad loans. But there are attempts to hand over nationalised banks to these private sector players, it added.
Notably, the government has proposed to privatise two more PSBs after having divested the majority stake in IDBI Bank to LIC in 2019. AIBEA said the decision to lift the embargo on private sector banks to have access to the government’s business is “unfair” and needs to be withdrawn.
Responding to the government’s assertion that it will allow private sector banks to become equal partners in government business, AIBEA said it is a strange move because unlike PSBs, the private banks are exempted from an emphasis on rural branch expansion, rural lending, agriculture loans as well as priority sector loans.
While PSBs mobilised 42 crore accounts under Jan Dhan Yojana for the poor people, the private sector banks have opened only 1.25 crore such accounts, it said.
“Why they were not equal partners in this pet scheme of the government. In giving agriculture loans, let private banks compete with public sector banks. In giving education loans to the poor students, will private banks compete? In opening rural branches, let them compete with nationalised banks,” AIBEA pointed out.
CH Venkatachalam, general secretary, AIBEA, said public sector banks’ social banking obligations have a cost.
“Lesser rate of interest on agriculture loans or education loans or MSME, etc, has a cost to the banks. The government’s business to these banks helps in cross-subsidization of the cost.
“If the government will distribute their business to private banks, the ability of public sector banks to lend to weaker and priority sectors on concessional rates of interest will become difficult because the government’s business helps these banks to balance the cost,” he said.
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