--classstrugggle-flipmag cs july pdf | Page 14

The scandal involving the Punjab National Bank , numerous other Indian banks and diamond merchant Nirav Modi has once again brought the issue of the crisis if Indian banking system to the fore . It is clear that the crisis is deep rooted than appears as a mere scandal . The government is arguing that it is the act of some bad elements and not a systemic failure . It is pushing privatization as a solution . Let us examine the issue from the beginning . The commercial banking system was started with the establishment of Bank of Bengal in 1809 , Bank of Bombay in 1840 and Bank of Madras in 1843 . These three were merged to form Imperial Bank , which was later nationalised and renamed as State Bank of India in 1955 . The Reserve Bank of India was established in 1935 as a central currency and banking regulator . Following this several private banks were established by private share holders .

Between 1947 and 1955 , about 361 private banks failed . The savings deposited by the people in these banks has all gone . In 1960s , there was one SBI and several private banks owned by big bourgeoisie . Only a tiny share of household savings , primarily from metro cities , was being deposited in banks . Bank credit was provided almost entirely to the industrial houses . The bank credit to agricultural sector is a little over 2 per cent in 1967 .

The Indian ruling classes felt the need to have commercial banks to garner household savings from urban and rural areas , so as to utilize those funds for their capital needs . The private banks at that

14 time had neither interest nor capacity in expanding their operations to rural and urban areas . This is true even today as the private banks that were allowed to operate after new economic policies have very negligible rural operations . Moreover , the green revolution strategy that was ing implemented during 1960s necessitated the credit extension to agricultural sector to create market for chemical fertilizers and other inputs . Thus the government of India nationalized 14 banks in 1969 and another six more in 1980 .

The then Prime Minister Indira Gandhi placated the nationalization of banks as a socialistic measure which would provide the cheaper bank credit to small industries and peasants , who were dependent upon usurious private money lenders .( Of course the situation did not change much even today ). However the result was as predicted : The Indian big bourgeoisie gained control of the entire savings of the middle classes , who deposited their hardearned money in the nationalized banks with hope that their money was in the safe custody of the government . These savings were deposited ( still being deposited ) in the industrial , commercial and even speculative ( as was seen in the case of Deccan Chronicle ’ s betting in IPL cricket matches ) operations of big bourgeoisie . Until the

Top 5 Banks ’ Gross NPAs PSB Gross NPAs ( Rs . Billion )

government issued orders to the Public Sector Banks ( PSB ) to lend 18 per cent of their total advances to the priority sector , the PSBs had not looked toward the agricultural sector .

After the nationalization , the banking sector expanded phenomenally and consequently the drain of bank funds by the big bourgeoisie , in both legal and illegal way , also grew phenomenally . The big bourgeoisie had vast finance capital at their disposal ..

The big bourgeoisie have their representatives on the Board of ‘ directors of PSBs . They also take position in the Board of RBI . The so-called independent directors are agents of the big bourgeoisie . Senior bureaucrats who are supposed to supervise the functioning of PSBs are offered lucrative benefits by the big bourgeoisie . Thus a nexus was formed to drain the money of people . When the big bourgeoisie refuse to pay back their loans on one pretext or the other , they were named as Non Performing Assets ( NPA ) and were later written off or the government in the name of recapitalization of banks provides them funds through budgetary resources . During the middle of 1980s , the NPAs of PSBs soared to more the Rs . 10 lakh crore , mainly due to non-payment by a score of big capitalists . The unions

June 2014 June 2017

Class Struggle