BJP is selling Government-owned banks and that is almost equal to selling country’s wealth, quite literally

The Tatva Staff February 13, 2021

We all saw the Financial Depression of 2008 that struck the entire world and it was nothing but due to vast amount of Private players in the market and the way Indian government is slowly selling off the country’s assets, this situation could backfire very badly.

First time in the history of Indian banking since 1969, government-owned banks are being sold off to private players due to unmanageable Non-Profitable Assets (NPAs) with them, and the government instead of dealing with them is choosing to get rid of the entire entities.

The website of the US Federal Deposit Insurance Corporation (FDIC) — an independent body created by the US Congress to maintain stability and public confidence in financial system — carries this information prominently. In the 20 years from 2001 to 2020, as many as 559 private banks with assets of $721 billion failed in the US.

There is a myth that if a bank gets large enough, it will not fail. Wrong. While one can agree that the larger the bank, the greater its ability to absorb losses, this does not mean it cannot fail. The axiom “Higher you go, harder the fall” applies best to private banks. This year we were all witness to the failure and subsequent reorganisation of YES Bank.

According to economists, the government wants only 4 to 5 government banks in the country. Currently, there are 12 state-owned banks in India, of which the central government holds more than 51 percent.

This privatization even if supposedly the last option left with the government (which is not the situation currently) will lead to a massive job loss trend in Banking sector as private players tend to lose resources when in such a crisis.

Apart from this, some officials have suggested to the government that these banks should be restructured before privatization so that their losses can be reduced.

Along with banks, Modi government has been planning to privatize larger public entities like railways, Airlines and LIC. The government has been questioned by opposition parties and labour organizations against this large scale privatization in the country.