No justification for waiving off bank loans of capitalist defaulters!

The hidden agenda is to wreck public sector banks so as to accelerate privatisation!

Ever since Finance Minister Jaitley announced an allocation of Rs. 2500 crore for the “recapitalisation” of banks in his budget speech on 29th February, the issue of capitalist loan defaulters has caught the public attention. What is the real content of this “recapitalisation”? Public funds are being put into the hands of public sector banks to make up for losses incurred in writing off loans to companies owned by private shareholders. In other words, the people as a whole are being made to bear the burden caused by capitalist defaulters, instead of the State taking steps to recover what they owe.

All the unions of public sector bank workers have been demanding for many years now that the names of defaulting capitalist companies must be made public and effective steps taken to recover what is due from them. The Central Government is doing the exact opposite. For the last six months, both the Finance Ministry and the Reserve Bank of India have been demanding that banks must take “non-performing assets” out of their balance sheets and report it as a one-time loss. It means that banks must write off the dues of defaulting big capitalists instead of seizing their property and recovering what they owe. As a result of such loan waivers, public sector banks reported a loss of about Rs. 10,000 crore during the quarter October-December 2015. They are expected to report large losses during January-March 2016 as well.

The Case of Vijay Mallya

The case of Vijay Mallya, the capitalist who owns Kingfisher beer and Kingfisher airlines apart from numerous other assets in India and abroad, has been in the media headlines in recent times. He owes public sector banks as much as Rs 9,000 crore. He was declared a “wilful defaulter” many months back by Punjab National Bank, State Bank of India and United Bank of India. It means that he was in a position to return the loan but deliberately did not do so.

All these years and even after he was declared a wilful defaulter, Mallya continued to enjoy a luxurious life in India and abroad. In contrast, workers employed in his company Kingfisher Airlines have been protesting against non-payment of their salaries for many months. All this was known to the senior management of the banks and to their owner, the Central Government. Yet no action was taken against this defaulting capitalist. He was allowed to continue as a member of the Rajya Sabha even while he was looting the public sector banks and not even paying wages to workers. When news about Mallya hit the headlines, he was allowed to quietly leave the country. After the thief has run away, a big drama is being enacted by the Central Government, with the Finance Minister declaring that “we will recover every paisa from him!”

Vijay Mallya is not the only big capitalist who has been looting the public sector banks. A total of 1164 wilful defaulters owe State Bank of India as much as Rs. 11,705 crore. Punjab National Bank has identified 904 wilful defaulters with outstanding dues of Rs. 10,870 crore. Similar lists exist for all the other public sector banks. The total amount of bad loans of all the public sector banks is in lakhs of crores of rupees.

One of the aims of focusing people’s attention on one individual case is to divert attention from the fact that it is a systemic problem. There is a nexus between the biggest capitalist borrowers and those in charge of the money lending institutions, and this is the case both in public sector banks and in private banks. Monopoly capitalists control the private banks in addition to the State which owns the public banks.

How can there be any justification for this blatantly pro-capitalist and anti-people policy? Finance Minister Jaitley and Reserve Bank Governor Rajan are both invoking the mantra of “global competitiveness” and the baton of “global standards” to justify shifting the burden of capitalist defaults on the people’s backs. They claim that bringing down the proportion of “non-performing assets” or bad loans from the balance sheets of Indian banks is urgently required in order to comply with global banking standards. The global standards they want to comply with have been defined by none other than the biggest monopoly capitalists and financial barons of the world.

The objective of asking banks to waive off such large amount of loans is not just to help those particular capitalists who have defaulted. There is another ulterior aim, which is to discredit public ownership of banks and prepare conditions for accelerating privatisation. If banks keep making losses quarter after quarter, more capital would be repeatedly needed to be put into them. At a certain stage, such banks will be asked to raise capital from big monopoly houses. This is how the privatisation of banks is planned to be carried out, through the back door. Repeated losses on the books of public sector banks will be used to promote privatisation as the solution. This the reason that the Chief Economic Adviser, Arvind Subramanian, told the heads of the Central Bureau of Investigation and the Central Vigilance Commission in a recent meeting not to come in the way of write-off of bank loans. “No public sector manager is willing to write off a single rupee because he fears the CBI and CVC will go after him. And he is right. Because I guess you will go after him,” he said. In other words, the Chief Economic Adviser to the Government of India is asking the institutions meant to safeguard the country’s interest not to come in the way of private loot of public funds by wilful defaulters!

The first bank which has been selected for immediate privatisation is the IDBI Bank. The Finance Minister announced in his budget speech that the government is committed to bring down its shareholding in the IDBI Bank from 80% to less than 50%. The IDBI Bank wrote off Rs 3700 crore of loans owed by several defaulting capitalists, including Vijay Mallya, during October-December 2015. It reported a loss of Rs 2200 crore during that quarter, which means that if the loans had not been written off it would have reported a profit of Rs. 1500 crore!

The Finance Minister has also announced the plan to set up an expert committee to work out a plan to reduce the number of public sector banks (27 presently) to 6-8 large banks, by merging many of them. It is being claimed that this is necessary in order to improve the efficiency of public sector banks and make them competitive. It is a strategy aimed at cutting thousands of jobs and at dividing and weakening the unionised workers who constitute a powerful opposition to the privatisation program.

For accelerating the process of privatisation, a Banks’ Board Bureau has been formed in February 2016. This Bureau will give recommendations on appointment of directors in public sector banks and advise on ways to raise funds from capitalists and to carry out mergers and acquisitions in the banking sector.

The privatization of banks in India and deregulation of the banking sector has been repeatedly demanded by international finance capital and imperialist powers including the United States, Britain and France. The Indian monopoly capitalists are also interested in directly controlling big banks in the country, to meet their need for cheap finance to fulfil their imperialist ambitions.

All the hardworking people of the country must join hands with bank workers to defeat the anti-people and anti-national plan of the big Indian and foreign capitalists to privatize the banking sector in our country. We must demand that the banking sector must be brought under social control of the people, whose deposits make up the bank’s wealth. Instead of being oriented towards profit maximisation and global competitiveness, banking must be oriented to fulfil the needs of all members of society. This is the demand of the working class and toiling majority of people.

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Vijay Mallya    Banking    Apr 1-15 2016    Voice of the Party    Economy    

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