Patnaik warns against bid to privatise banks

Noted economist Prabhat Patnaik has warned against the bid to privatise banks on the premise of the mounting rate of non-performing assets in public sector banks.

Inaugurating a one-day workshop organised by the Movement for Indian Financial Independence here on Friday, Prof Patnaik said that major corporate defaulters were responsible for creation of about 56% of the 75% NPAs (non-performing assets) and privatising nationalised banks would ultimately amount to entrusting the banks with those who looted them.

Certain estimates say that the NPAs amount to ₹8 lakh crore. The pressure for privatisation had been there for some time and it gained steam post liberalisation. While banks released loans against inventories before liberalisation, the government mounted pressure on banks to liberally fund private companies for infrastructure development and in due course the loans became NPAs.

The only option to save the banking sector was to ensure that they should be retained in the public sector with social control. Representatives of employees should be included in the director board and they would function like a watch dog against wanton release of funds by crony governments, he said.

The government should have released the list of large defaulters, formed a committee to find out the reasons for defaulting the repayment and on establishing mala fide intent, the assets of such borrowers should have been attached. Instead of the government, it was the All Indian Employees Bank Employees Association that published the list, he said.

Convener K.N.Harilal, in his presidential address, said management of the savings of the public reaching banks should be under social control. This was imperative for the existence of banks and in the interest of the depositors.

NITI Aayog chief Aravind Panagariya had exhorted political parties to make a commitment on bank privatisation in their Lok Sabha election manifesto and that triggered the launch of the movement.

Any threat to the independence of financial institutions would have a bearing on the independence of the country too, he said.

Finance Minister T.M.Thomas Isaac, who inaugurated a public meeting in the evening, said the thrust was on getting prime ratings of foreign agencies.

The movement should take the lead for imparting informal education among the common man to make them aware of the perils of privatisation of banks ahead of the Lok Sabha elections, he said.