Civil Society Group Challenges Finance Minister's Remarks on Bank Nationalisation and Privatisation Risks

Finance Minister Nirmala Sitharaman recently remarked that bank nationalisation did not achieve its intended goals. This statement has led a civil society group to challenge her view and advise against privatising public sector banks (PSBs). The Bank Bachao Desh Bachao Manch (BBDBM), based in Kolkata, highlighted the transformative impact of nationalisation on India's financial landscape.

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In a letter addressed to the finance minister, BBDBM argued that nationalisation significantly altered India's financial system. It ensured institutional credit reached rural and semi-urban areas, which private banks had previously neglected before 1969. The group asserted that the country's economic growth since then is largely due to PSBs, which they consider the backbone of India's financial structure.

Public Sector Banks' Role in Financial Inclusion

The civil society group emphasised that PSBs still hold over 60% of total deposits and advances. They operate more than 90% of rural branches, serving farmers, low-income households, and small businesses. These banks have been pivotal in expanding financial inclusion, opening over 53.1 crore Jan Dhan accounts, with more than 31 crore in rural and semi-urban areas.

BBDBM also pointed out that PSBs have played a crucial role in implementing government-backed insurance and loan schemes. These include PMJJBY, PMSBY, Mudra, and PM SVANidhi. The forum alleged that corporate borrowers have benefited from leniency, with PSBs writing off over Rs 12.08 lakh crore between FY16 and FY25.

Concerns Over Privatisation

The letter from BBDBM expressed concerns about the government's portrayal of nationalisation as a failure. They fear this narrative could lead to transferring public sector banks to select business conglomerates. Joint Convenors Biswaranjan Ray and Soumya Datta signed the letter, warning that privatisation could threaten financial sovereignty.

The group cautioned that privatisation might limit credit access for poor and rural citizens. They noted that total write-offs across scheduled commercial banks exceeded Rs 16.35 lakh crore, with more than Rs 9.26 lakh crore linked to large corporate and service sector borrowers. Recoveries were only around 20.5%.

Sitharaman reassured that privatising state-owned banks would not harm financial inclusion or national interests. However, BBDBM remains sceptical about these assurances, urging caution against any move towards privatisation.

With inputs from PTI