The All-India Bank Employees Association has criticised the Reserve Bank of India granting licence to private companies to open payments banks as a move to boost private sector banks at the cost of their public sector counterparts.
AIBEA General Secretary Ch Venkatachalam said in a statement that the move would minimise the role of public sector banks and shrink their market share. In the name of banking reforms, he said, the government was trying to diminish the status of PSBs and boost private banks.
“Because of the colossal private corporate delinquency, PSBs are saddled with huge bad loans of nearly ₹6 lakh crore,” Venkatachalam said. “All these are private corporate companies who had defaulted and it is strange that the RBI and the government want to encourage the very same private sector to start banks.”
He pointed out that at the end of the last financial year there were 7,035 cases of wilful default involving bad loans of ₹58,792 crore. The top 30 borrowings from PSBs amounted to ₹1.21 lakh crore.
He noted that because of the fall in profits, banks were striving hard to attract low-cost deposits and every bank was now focussing on savings and current accounts as a means of reducing cost of funds and improving profitability. If private payments banks are allowed to collect savings and current deposits, PSBs will be deprived of them and hence the cost of banking services in PSBs will increase, he warned.
“At a time when the government wants to ensure that banking services reach everyone, the need is to strengthen and expand PSBs who alone can take care of the common people’s banking needs, the private companies are being encouraged to start payment banks,” Venkatachalam said.