The Hindu Business Line : Recommendations of Hoda panel

The recommendations of the Planning Commission-appointed High Level Group on services sector headed by Planning Commission Member, Mr Anwarul Hoda, for reduction of government ownership to 33 per cent, consolidation among banks, abolition of bank branch licensing, phasing out of directed priority lending by banks, gradual reduction in the statutory liquidity ratio (SLR) requirement for banks, etc., once again betrays the lack of sensitivity and understanding of the Indian situation on the part of so-called experts.

But for total Government ownership of banks, no branch would have been opened in the rural areas, where India largely lives.

Mass banking policies and practices with massive branch expansion and enabling common man, small farmer, cottage and small-scale and tiny industrialist, trader, village artisan, self-employed etc. to avail of bank credit was the result of bank nationalisation.

With 75 per cent of bank deposits from the household sector, it must be the bounden duty of the banks to deploy the funds with a social vision for the advancement of various regions and segments of the population.

That role and responsibility of the banks is being fulfilled through priority sector lending. SLR funds benefit the Government in meeting plan and non-plan expenditure.

The Committee’ negates the beneficial aspects of government ownership and mass-social banking policies by recommending privatisation, consolidation, dismantling of directed credit and SLR is aimed at serving the interests of big corporates who are the main creators of non-performing assets in banks amounting to more than Rs 1 lakh crore.

The Committee has ignored the fact that thousands of banks in the private sector have collapsed in India and elsewhere, that consolidation with merely a profit motive will lead to branch closures and curtailment of banking services in the rural areas, that priority sector lending is inevitable for inclusive growth and that bank funds, being people’s savings, must be used for the Plan priorities of the Government.

At a time when the Reserve Bank of India is lamenting that financial exclusion is a consequence of lopsided reforms in the banking sector, the Hoda panel report does not present any remedial measures in this regard; rather it adds to the exclusion.

K. S. Krishna Dt. Secy., AIBEA, Ernakulam

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