Bhopal (Madhya Pradesh): The All India Forum of Bankers' Association on Thursday explained why they were against the proposed privatization of the public-sector banks (PSBs).
They said the most common ground for privatization is that public sector banks do not earn enough profits, adding, 'There is an argument that PSBs need to be privatized to boost efficiency. We all know the efficiency of Private Banks and that many of them have failed and shut down in the past due to mismanagement.'
The only issue being confronted with the PSBs was that of huge Non-Performing Assets (NPAs) in which the major share was of big corporates. This shows that it is not the nationalisation of the banks but the willful default by the corporate houses and conglomerates that dragged the PSBs into this crisis, they added.
Even under the Insolvency and Bankruptcy Code, while bad loans have been resolved and banks could get back some portion of the loan, it has been with huge haircuts for the Banks.
The forum has claimed that the private sector banks are the ones that have been bailing out ailing private sector banks such as Global Trust Bank, United Western Bank and Bank of Karad. In the recent past, SBI bailed out Yes Bank at the time of crisis. Private sectorsí largest non-banking financial company, Infrastructure Leasing and Financial Services (IL&FS), was bailed out again by public sector SBI and LIC.
Private sectors like RBL Bank, Bandhan Bank and four small finance banks have posted losses. RBI cancelled the licenses of private sector Subhadra Local Area Bank, scaring away common people as they expose their hard-earned savings, added the forum.
They said the number of public-sector banks has increased substantially and so has the profits of the banks, except the losses due to the defaulting corporates.
Operating Profits of Public Sector Banks at a glance
Year. Total Operating Profits (Rs in cr)
2011-12 116,337
2012-13 121,839
2013-14 127,632
2014-15 138,064
2015-16 138,191
2016-17 159,022
2017-18 155,690
2018-19 149,804
2019-20 174,336
2020-21 197,374
Gross profit in 10 years - 14,78,289
As per the bankers association, there are many corporate houses that took out loans from the public sector banks and turned defaulters. The PSBs yet managed to recover some amount, suffering huge losses.
