Why has the concern of public sector banks increased?
In fact, with this decision of the Center, public sector banks will reduce the earnings through various types of government transactions. Many types of social banking schemes of the government are a big way of earning of these banks. Now some part of this is going to be in the bag of private banks also. In such a situation, there will be increased competition in these categories for these public sector banks.
Bank unions say that the decision of the government business will be correct only when all the banks will be included in the social banking agenda of the government. In this, many types of welfare schemes should be included from the dormant Jan Dhan account. Currently, the burden has to be borne by the public sector banks.Large stake in government in public sector banks
Actually, Proprietary structure of public sector banks This type of situation has been created due to the difference in The government holds a large stake in most public sector banks. Till 31 December 2020, the government holds a 70 percent stake in 10 public sector banks. In three banks it is more than 90 per cent. Many times it is said that public sector banks act like a unit of the Ministry of Finance.
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The decision of these banks regarding business, especially following welfare schemes, is at the behest of the Center. It is also not a secret that many decisions in these banks are made at the behest of the government. Something similar happened with the Jan Dhan bank account. The loan scheme for the MSME sector from Rs. 3 lakh crores loan to Rs. 10,000 crores for those earning money by setting up shop on the street.
The most risky debt burden on public sector banks
However, these orders are never formalized. Bank officials are asked to fulfill their target only. A large part of the working time in public sector banks is spent in completing these government schemes. This affects their performance as well. The same situation is seen in the industries and economically weaker sections. The share of loans stuck in these PSBs is also so big because they give loans from small companies to large infrastructure projects of the government as well. On the other hand, private banks rarely take such risks.
For example, 42 crore Jan Dhan accounts were opened in government banks under the government’s financial inclusion program. However, only 1.25 crore such accounts have been opened in private banks. This information is provided by the data released by the Bank Employees Union.
Access to state-run banks in rural areas
Most of these bank accounts are zero-balance accounts and banks have to spend 60 to 70 rupees to maintain them. Under many types of welfare schemes, these banks give loans to the weaker sections at a lower interest rate. These banks also have the burden of operating in rural areas. Most private banks restrict their operations to urban and semi-urban areas. This is not the case for public sector banks.
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If public sector banks do not follow the instructions of the government…?
On 24 February, the Bankers Committee of Madhya Pradesh wrote a letter to the Finance Service Secretary, stating that the State Bank of India’s Magariya branch was sealed by the district authorities on 22 February. The reason for this was that this branch did not provide funds to the vendors under the Prime Minister Street Vendors Self-Reliance Fund and the Chief Minister Rural Street Vendor Scheme. This branch did not complete the formalities even after many reminders.
The local district magistrate, along with a team of police, sealed the branch, taking out the bank employees. The district administration, stating the direct reason, said that this branch was being operated from a residential property.
Why do private banks not participate in social banking schemes?
Private banks adjust their risk and profits. If the government wants public sector banks to work like private banks, then a similar level of system has to be prepared for them. The private sector of the center is seen as participating in government business in this way.