To

The Editor
The Hindu Business Line
Chennai
Dear Sir,
We have come across the Editorial in your columns published yesterday i.e. 8
th
August, 2014
relating to the Syndicate Bank Bribery Case. Your comments, observations and conclusions
obviously stem out of your prejudice against public sector banks and a bias in favour of
privatisation of Banks. The way you have argued for implementation of P J Nayak
Committees recommendations makes this amply clear.
You are well aware that Nayak Committee has recommended repeal of Bank Nationalisation
Act and SBI Act which we feel is preposterous looking to the unparalleled contributions our
public sector banks have made for the economic development of our country. No one can
dispute these significant contributions.
Further, the whole world has acknowledged that Indian banking system remained insulated
from the recent global financial tsunami only because our Banks were predominantly under
public sector. 75 lac crores rupees of hard earned savings of the Indian people available in
the Banks would have been put to great risk and catastrophe. Our PSBs saved the peoples
money, saved our economy and thus saved our nation.
Furthermore, given the present economic scenario of stagflation, public sector banks have a
great role to play in not only achieving total financial inclusion but to cater to the needs of all
segments of the economy. This is possible only by enlarging and strengthening the public
sector Banks in a big way and not by privatising the PSBs through dilution of Governments
capital. Everyone knows that PJ Nayak Committee recommendations are the mouthpiece of
RBI/Governments philosophy of banking reforms and not borne out of any genuine
requirement of the banking sector.
You have attributed the SK Jain bribery episode to the inadequate pay packet compensation
of the CMDs. With the same pack packet, are there not extremely honest, upright CMDs, EDs
and other top Executives in the Banks ? The majority of the Bank executives are committed
to public sector banking and they have grown in the ladder under public sector banks. While
the emoluments of the CMDs and EDs have to be substantially increased for which there is a
real need, emoluments alone is not the panacea for better integrity.
Your Editorial argues for dilution of Governments equity in PSBs as recommended by Nayak
Committee because your perception is that Banks in private sector will ensure better
governance. Have you forgotten that Bhushan Steels who are alleged to have given the
bribe is a private sector company ? Why that better governance was missing there ? Bulk of
the bad loans in the Banks are attributable to big private companies and quite a number of
them are willful defaulters including the infamous Kingfisher Airlines. Why there is no better
governance on their part to repay the loan taken by them ?
To go further, what is the track record of private Banks in our country ? Have not many of
them collapsed due to utter mismanagement ? What happened to Global Trust Bank ? What
happened to United Western Bank ? These are recent samples. Indian banking history is
replete with dozens of private Banks cheating and eating public money and finally Public
Sector Banks had to come to their rescue like Nilkant Mahadev keeping the poison on the
throat.
Since the list of collapsed private banks in the last 50 years will be too big to be named here,
we are just mentioning the names of the following private banks, which had failed and
peoples money in these failed Banks rescued by merger with one or the other Public Sector
Banks in the last two decades.
1. Bank of Cochin Ltd., merged with State Bank of India
2. Lakshmi Commercial Bank Ltd., merged with Canara Bank
3. Bank of Bihar Ltd., merged with State Bank of India
4. Hindustan Commercial Bank Ltd., merged with Punjab National Bank
5. Miraj State Bank Ltd., merged with Union Bank of India
6. The Traders Bank Ltd., merged with Bank of Baroda
7. Bank of Credit & Commerce International merged with State Bank of India
8. The Bank of Tamil Nadu Ltd., merged with Indian Overseas Bank
9. Bank of Thanjavur Ltd., merged with Indian Bank
10. The Parur Central Bank Ltd., merged with Bank of India
11. The United Industrial Bank Ltd., merged with Allahabad Bank
12. The Purbanchal Bank Ltd., merged with Central Bank of India
13. Bank of Karad Ltd., merged with Bank of India
14. Bareilly Corporation Bank Ltd., merged with Bank of Baroda
15. Sikkim Bank Ltd., merged with Union Bank of India
16. Benares State Bank Ltd., merged with Bank of Baroda
17. Nedungadi Bank Ltd. has been merged with PNB.
18. Global Trust Bank has been merged with Oriental Bank of Commerce
19. United Western Bank merged with IDBI Bank
Even today we have concerns that some of the present private Banks big or small are not
that strong and it is necessary to keep a watch on them. That is why AIBEA is demanding
that all private Banks should be brought under public sector.
What India needs a strong and vibrant public sector banking. What India needs is expansion
and further penetration of public sector banking and not contraction and consolidation.
What PSBs need is better regulation and monitoring by Government and RBI and not de-
regulation and private control. There should not be political interference in the functioning
of the Banks but there should be more and more Governmental control of the Banks who are
dealing with huge savings of the common people at large.
The Syndicate Bank - S K Jain bribery episode is another reminder of the need
to plug the loopholes in the banking system to weed out corrupt elements. It is
an urgent reminder to the need for rejecting Nayak Committee
recommendations of distancing the Government from PSBs.
Finally, we hope that you will publish this letter in your columns.
Yours faithfully,
Sd..
C H Venkatachalam
General Secretary