Citibank, a US banking giant, axed as much as 75000 (20%), of its 375000 staff worldwide, within two months. Even well into 2009, we frequently come across headlines like “Lloyds to cut 625 jobs” (May 19, 2009), “UBS to cut 11% of global workforce” (April 16, 2009), RBS to cut upto 9000 jobs across globe” (April 07, 2009), “AVIVA to shed 1690 jobs” (April 03, 2009), “Swiss Re to cut 1200 jobs” (April 02, 2009), “Morgan Stanley set to axe 1800 staff” (February 02, 2009), “Barclays to cut 2100 jobs worldwide” (January 14, 2009), – the list is almost unending. ILO estimates total job-loss of around 20 million worldwide.
In India, Imperial Bank of India was the first Commercial Bank to be nationalised (in 1955) and renamed “State Bank of India” (SBI), followed by nationalisation of seven (7) subsidiaries of SBI (in 1959). However, in popular concept, Bank nationalisation refers to nationalisation of 14 Scheduled Commercial Banks, then having deposits of Rs.50 crore or more, on 19th July 1969. In that sense of the term, 19th July this year (2009) marks the 40th anniversary of Bank Nationalisation. On 15th April 1980, six (6) more Banks, then having deposits of Rs.200 crore or more, were nationalized. In common parlance, these (14+6=) 20 Banks are known as Nationalised Banks. After merger of New Bank of India with Punjab National Bank, the number of Nationalised Banks now stands at nineteen (19).
Prior to Bank Nationalisation in 1969, Banking business in India was mostly controlled by private Banks marked by city-centric banking, frequent bank-failures and consequent pauperisation of numerous small and marginal depositors. The extent of bank-failures during those days can be gauged from one simple fact that as against 566 Scheduled Commercial Banks operating in 1951, only 89 survived till 1969, the rest going into liquidation in between.
During the 40 years of nationalisation, Banking in India has traversed through two distinct phases, one being the pre-liberalisation era from 1969 to 1991 and the other being the reforms-regime since the introduction of the IMF-World Bank dictated neo-liberal economic policy, euphemistically called Globalisation, since 1991. During the first phase, the progress of Indian Banking system in terms of branch network, reach to the people, deposit mobilization, growth in advance portfolio and lending to priority sector etc. have not only been significant but also unthinkable in pre-nationalisation era.
Employment generation in Public Sector Banks (PSBs) also recorded an enormous increase during this period, from 1,75,368 in 1969 to 8,56,571 in 1991. It is largely because of the role of Nationalised Banks, during this period, in rural India, that a Green Revolution could be brought about and we have become self-sufficient in food production.
With the beginning of new economic policy in 1991, the scenario started changing. To set the clock backwards and to revert to private banking regime, the Government of India had appointed numerous committees, starting with Narasimham Committee – I through Narasimham Committee – II, Khan Committee, Verma Committee, S.C.Gupta Committee, Raghuram Rajan Committee, Anwarul Hoda Committee etc. to (till date) Rakesh Mohan Committee, and secured the IMF, World Bank desired recommendation for closure/merger of Banks and Branches, downsizing of manpower, reduction in priority sector lending, dilution of Government holding in Public Sector Banks (PSBs) etc.
In tune with the recommendations of these committees, Central Government has already amended the Banking Companies (Acquisition and Transfer of Undertakings) Act 1970/1980 to pave the way for bringing down Govt. holding from 100% to 51%; out of 27 PSBs, as many as 20 Banks have already gone for public issue. Similarly, manpower of Banks has been downsized through ban on recruitment, including compassionate recruitment (system of recruitment of the next of kin of an employee dying in harness), and Voluntary Retirement Scheme. Outsourcing of regular and perennial jobs, hitherto performed by the regular staff of Banks, even of the core banking functions, has been another instrument for doing away with employees. As a result, total staff strength of PSBs has come down by more than 1.5 lakhs from 8,75,390 in 1992 to 7,21,700 in 2007 despite increase in business by around 20 times.
Over the last decade and a half, about 5000 Bank-Branches have been closed down, almost one Branch per day. As a consequence, number of people served per Bank-Branch has gone up from 11000 in 1991 to 15000 in 2000; the figure must have gone up now. State Bank of Sourashtra has already been merged with SBI and decision has recently been taken for merger of State Bank of Indore with SBI; similar other mergers of PSBs are being contemplated. Share of credit to agricultural sector has gone down from 18% of total credit portfolio in 1991 to 8% in 2008. In short, the orientation has been shifted from mass-banking to class-banking, to the benefit of big business and share market.
Much as they would have liked, successive governments at the centre could not, however, go full-scale with their disinvestment agenda because of the stiff resistance of the Bank employees, including officers, through numerous strikes-struggles and the opposition of the Left Parties both inside the parliament and outside. But now, with the end of their dependence on the Left, the 2nd UPA Government seems hell bent on going full-steam with their reforms agenda. The Government has been refusing to learn the lesson from the recent financial melt down in the United States and elsewhere in advanced capitalist economies.
While it would be out of place for a full-fledged discourse on the effects of global financial melt down, we may profitably quote from July 18, 2009 edition of PRO-PUBLICA (A US journal), “Four banks failed on Friday, soaking the FDIC’s deposit fund for more than $1 billion. ………….. The total number of bank failures for the year now stands at 57.” A list of failed Banks published by FDIC (Federal Deposit Insurance Corporation of US) puts the number of Bank failures since the onset of the recent melt down in September last (2008) at 98; this is over and above those Banks which just survived through mergers and/or takeovers; FDIC apprehends, it is reported, the number of bank failures in US in 2009 only may be around 100. The picture is no different elsewhere in the capitalist world. While US Government came forward with an initial bail out package of $700 billion, the British Government had to dole out 43 billion Pounds of public money to save its banking system.
Total outlay in such bailout packages is estimated at around $7 Trillion, of which the share of US Government alone is around $1.7 Trillion. What an irony, the most vocal and staunchest votaries of free market, who shouted from the roof-tops, “there is no alternative” (TINA) are today talking of state-intervention, of bailing-out the collapsing private entities at the cost of the state-exchequer, of the poor tax-payers. While the United States have taken over majority stake in many financial majors, or semi-nationalisation, in Britain, there has been full scale nationalisation of some of its largest private-banks. As has been aptly put by an economist, “the Free Market is officially buried”! Now, the spokesmen of market economy are shouting, “Privatise Profits & Nationalise Losses”.
Compared to this failure of the market-driven and privately managed financial system, our own financial system, dominated by PSBs (controlling more than 80% of the Banking Business) and nationalised Insurance sector are far more sound and stable so as to be able to substantially withstand the financial tsunami. Mr. Paul Angelides, The Chairman of the Commission appointed by the US Government to enquire into the causes of the current financial crisis, has admitted in a statement, “Millions of Americans have lost their homes and hard-earned pensions, and it’s our responsibility to make sure the facts are known so this is less likely in the future”. In India, on the other hand, not a single depositor or pensioner has suffered any loss due to the current melt down, because both the Banking Sector and the Pension Funds are dominated by Public Sector.
To whom should the credit go? Certainly not to the Manmohan-Montek duo or their likes! Had not we – the Trade Union movement of the Country – and the Left forces opposed their evil intentions and efforts tooth and nail, our financial system – the Banking, Insurance & other Financial Institutions – would have by now been privatised, Provident and Pension Funds would have been in the hands of private sharks – Indian and Foreign – and invested in highly speculative share-markets AND a full-fledged Capital Account Convertibility would have been in place. Where had we been now under such circumstances? Our Banks, Insurance Companies and other Financial Institutions would have been in the line for insolvency, hard earned money of the poor depositors would have gone down the drain, Provident Fund and Pension, the only post superannuation relief for salary-earners, would have vanished away. It is only because of sustained struggle of the Trade Unions and stiff opposition of the Left Parties that we are saved from such an eventuality.
The so-called intellectuals and the self-proclaimed pundits, who hurl abuse, churn out invectives and spread lies, day in and day out, against the Trade Unions and the Left forces for all the ills afflicting our country, the role of PSBs in maintaining financial stability and economic growth has been recognised even in the RBI Report on Currency & Finance, 2006-08, “…There have been several advantages of public sector banks over private sector and foreign banks. In comparison with private and foreign banks, public sector banks through their huge branch network have played a far greater role in extending credit to agriculture and SME sector as envisaged under the priority sector norms for them. Public Sector Banks have also been more actively engaged in promoting financial inclusion, which, of late, has emerged as a major policy objective.
It has been argued that in the Indian context, particularly in view of the need to give adequate attention to agriculture and the rural sector, public sector character of existing PSBs should not be given up. Furthermore, a well diversified banking system, operating under competitive conditions, bodes well in the perspective of financial stability….” (page.158 para.8.37).
Another, and perhaps the most important, striking feature of the current financial melt down is that all financial institutions, big or small, in the capitalist world have gone on a job-cut spree as soon as the crisis set in (September 2008); for example, Citibank, a US banking giant, axed as much as 75000 (20%), of its 375000 staff worldwide, within two months. Even well into 2009, we frequently come across headlines like “Lloyds to cut 625 jobs” (May 19, 2009), “UBS to cut 11% of global workforce” (April 16, 2009), RBS to cut upto 9000 jobs across globe” (April 07, 2009), “AVIVA to shed 1690 jobs” (April 03, 2009), “Swiss Re to cut 1200 jobs” (April 02, 2009), “Morgan Stanley set to axe 1800 staff” (February 02, 2009), “Barclays to cut 2100 jobs worldwide” (January 14, 2009), – the list is almost unending. ILO estimates total job-loss of around 20 million worldwide.
Even in India, there has been job loss of over a million in different sectors. However, in financial sector, dominated by PSUs as it were, there is not a single job-cut because of the current crisis. On the contrary, because of persistent struggle of the employees, including officers, there have already been 24488 fresh recruitments in SBI in 2008-09; similarly, in other PSBs too, there have been quite a few thousands of fresh recruitments. Though such recruitments are far below the existing vacancies, in PSBs, numbering more than one lakh, qualitative difference between our PSBs and private financial giants elsewhere cannot escape our attention.