BANK LICENCES TO CORPORATES IS A RETROGADE STEP

Mismanagement of private Banks in our country is not a news to anyone of us. Every now and then we observe that some private Bank or the other is getting into problems. Few months ago, we saw the crisis in YES Bank and how it was bailed out by the RBI and Government by managing capital from SBI. Now LVB has been donated to DBS. When you look back at the time capsule, the list is long.

1639 Banks collapsed in five decades and those were the years in 1930s, 1940s and 1950s when all Banks in our country were private banks, some of them also foreign banks. Many private banks were failing and getting closed. Innocent people who had kept their savings as Deposits in the Banks lost their money.

Failure of 1639 Private Banks in India – 1913 to 1960

Year	No. of Banks failed	Year	No. of Banks failed	Year	No. of Banks failed	Year	No. of Banks failed
1913	12	1926	14	1939	117	1952	31
1914	42	1927	16	1940	107	1953	31
1915	11	1928	13	1941	94	1954	27
1916	13	1929	11	1942	50	1955	29
1917	9	1930	12	1943	59	1956	28
1918	7	1931	18	1944	28	1957	30
1919	4	1932	24	1945	27	1958	28
1920	3	1933	26	1946	27	1959	38
1921	7	1934	30	1947	38	1960	26
1922	15	1935	51	1948	45
1923	20	1936	88	1949	55
1924	18	1937	65	1950	45
1925	17	1938	73	1951	60
TOTAL NO. OF BANKS FAILED					1639

AIBEA took up the issue and built up a national campaign. AIBEA also launched agitation demanding safety for people’s money. In 1957 .PrabhatKar, our beloved leader and the then General Secretary of AIBEA contested elections and became a Member of Parliament. He championed this issue in the Lok Sabha by repeatedly raising this issue and forced debates in the Parliament. Thus, outside AIBEA was fighting in the streets and inside the Parliament PrabhatKar echoed these issues.

Due to all these struggles and efforts, Government agreed and an amendment was made to Section 45 of the Banking Regulations Act. This Amendment to the B.R. Act enabled the RBI to intervene in the affairs of any Bank in public interest and merge that sick Bank with another Bank. This amendment stopped abrupt closure of any Bank.

Thus AIBEA played the important role in fighting for the interest of Depositors and in preventing Banks being closed down. Since then, no Bank in our country has been closed down. All the ailing Banks were put on moratorium and merged with another Bank.

From 1961 to 1968, 263 private Banks failed but all these Banks were merged with some Bank or the other. No Bank was closed.

Years	Bank failed	Years	Bank failed	Years	Bank failed
1961	47	1964	82	1967	15
1962	33	1965	42	1968	7
1963	20	1966	17	1961-68	263

AIBEA was not satisfied with this. Our visionary leaders PrabhatKar and H. L.Parvana wanted the Banks to be nationalised so that not only the people’s money is safeguarded, but also that money is helpful for national development instead of helping the private owners to earn more profit. From 1964 Conference of AIBEA held in Trivandrum, this call was given and a bitter struggle ensued. This struggle led to the Government accepting the demand and Madam Indira Gandhi nationalised the 14 major private Banks that were controlled by powerful Business Houses like Tata, Birla and others.

After nationalisation of Banks, we have seen so many failed private banks have been merged with public sector Banks. Public Sector Banks have become the NeelkantMahadev by swallowing the poison of loss of the private Banks and safeguarding the precious savings of the common people kept in the Banks as Deposits.

Failed Private Bank	Merged with Govt. Bank	Year
Bank of Bihar	State Bank of India	1969
National Bank of Lahore	State Bank of India	1970
Krishnarao Baldeo Bank	State Bank of India	1974
Belgaum Bank	Union Bank of India	1976
Lakshmi Commercial Bank	Canara Bank	1985
Miraj State Bank	Union Bank of India	1986
Hindustan Commercial Bank	Punjab National Bank	1986
Traders Bank	Bank of Baroda	1990
Bank of Tamilnad	Indian Overseas Bank	1990
Bank of Thanjavur	Indian Bank	1990
Parur Central Bank	Bank of India	1991
Purbanchal Bank	Central Bank of India	1991
Bank of Karad Ltd.	Bank of India	1993
Kashinath Seth Bank	State Bank of India	1995
Punjab Co-operative Bank	Oriental Bank of Commerce	1997
Bari Doab Bank Ltd.	Oriental Bank of Commerce	1997
Bareilly Bank Ltd.	Bank of Baroda	1999
Sikkim Bank Limited	United Bank of India	1999
Benaras State Bank Ltd.	Bank of Baroda	2002
Nedungadi Bank Ltd.	Punjab National Bank	2003
South Gujarat Local Area Bank	Bank of Baroda	2004
Global Trust Bank Ltd.	Oriental Bank of Commerce	2004
United Western Bank	IDBI Bank	2007
Bharat Overseas Bank	Indian Overseas Bank	2007
YES Bank – bailed out by	State Bank of India	2020

Everyone knows that the only major ill confronting our Banks today is the alarming and huge bad loans. Everyone also knows that the main people behind these bad loans are the Corporate delinquents and wilful defaulters.

Year	Bad Loans Written Off	Year	Bad Loans Written Off
2001	5,555	2011	17,794
2002	6,428	2012	15,551
2003	9,448	2013	27,013
2004	11,308	2014	32,595
2005	8,048	2015	49,976
2006	8,799	2016	59,400
2007	9,189	2017	81,684
2008	8,019	2018	1,28,230
2009	6,966	2019	1,96,849
2010	11,185	2001 TO 19	6,94,037 CRORES

In the name of Insolvency and Bankruptcy Code, Corporate defaulters are relieved of their huge loan obligations to the Banks and these bad loans are sold to other Corporates for cheap rates. Thus Banks are the losers and Corporates are the gainers in the process. See the following examples:

COMPANY/ BORROWER	LOAN AMOUNT DUE	RESOLVED for HAIRCUT/DISCOUNT/ CONCESSION GIVEN	PURCHASED BY
ALOK INDUSTRY	30,200 CR	5,052 CR	83%	RELIANCE
MONNET ISPAT	11,478 CR	2,892 CR	75 %	JSW
ELECTROSTEEL	13,958 CR	5,320 CR	62 %	VEDANTA
JYOTHI STRUCTURE	8,179 CR	3,691 CR	55 %	Rich individuals
BHUSHAN STEEL	57,505 CR	35,571 CR	38%	TATA
ESSAR	54,000 CR	42,000 CR	23 %	ARCELOR MITTAL

TOP 50 CORPROATE DEFAULTERS	BANK LOAN WRITTEN OFF (Rs. In Cr)
GITANJALI	5492	COASTAL PROJECTS	984
REI AGRO	4314	PAREKH ALUMINEX	975
WINSOM DIAMONS	4076	FIRST LEASING CO	929
ROTOMAC	2850	CONCAST STEEL & POWER	888
KUDOS CHEMI	2326	STERLING OIL RESOURCES	888
RUCHI SOYA	2212	STERLING BIOTECH	887
ZOOM DEVELOPERS	2012	ACTION ISPAT & POWER P LTD	887
FOREVER PRECIOUS JWELLARY	1962	DIAMOND POWER INFRASTRUCTURE	870
KINGFISHER AIRLINES	1943	SURANA CORPORATION	855
DECCAN CHRONICLES	1915	INDU PRJECTS	835
ABG SHIPYARD	1875	ARSS INFRASTRUCTURE	794
TRANSSTROY	1790	SHREE GANESH JWELLERY	774
SURYA VINAYAK INDUSTRIES	1783	ELECTROTHERM	768
S KUMAR	1581	ABC COTSPIN	766
GILI INDIA	1447	VARUN INDUSTRY	764
VMC SYSTEM	1331	ERA INFRA	738
SIDHI VINAYAK LOGISTICS	1318	SEL TEXTILES	718
GUPTA COAL INDIA	1235	SPANCO LTD	705
SURYA PHARMA	1208	B S LTD	701
NAKSHATRA BRANDS	1109	SAI INFOSYSTEM	683
INDIAN TECHNOMAC	1091	JAY POLYCHEM	677
JAIN INFRA PROJECT	1073	LOHA ISPAT	646
HUNUNG TOYS & TEXTILES	1039	JAS INFRASTUCTURE & POWER	630
K S OILS	1026	CENTURY COMMUNICATION	607
NAKODA LTD	1025	KEMROCK INDUSTRY & EXPORT	605
TOTAL WRITE OFF IN 50 ACCOUNTS			68,607 Cr

Banks incur losses due to provision for bad loans given to these Corporates:

Year	Public Sector Banks Operating Profit	Provision for bad loans	Net loss Rs. Crores
2015-16	1,36,926	1,54,918	17992
2016-17	1,58,982	1,70,370	11,388
2017-18	1,55,585	2,70,953	85,370
2018-19	1,49,804	2,16,410	66,606
2019-20	1,74,336	2,00,353	26,016

Can we hand over Banks to these Delinquents, Defaulters & Dodgers?

Banks deal with people’s money. Banks deal with public savings. It is risky to hand over Banks to these Corporates. (IRL-IPA)