'Can government play with people's money?'

'...Rs 137 lakh crores of people's money?'
'It is not the government's money, it is people's money.'

"They are actually making the banks bigger so that they become attractive for private people to buy them! This is just a prelude before selling them," C H Venkatachalam, general secretary, All India Bank Employees Association, tells Rediff.com's Shobha Warrier in the concluding segment of a two-part interview.

• Part 1: 'Nationalise all private banks!'

Because bankers who gave loans are punished for the NPA crisis and wilful defaulters go scot free, today bankers do not want to take the risk in giving loans at all...

You are right. Recently in Parliament, they released the list of 10,130 wilful defaulters and these people owe Rs 112,000 crores to various banks. Just 10,130 people!

When will these people who have the money but diverted it elsewhere so that they need not pay the bank, be caught?

Instead of punishing them, you are giving them concessions.

In this way, banking cannot be continued in our country.

Will people lose faith in banking itself?

Yes, slowly, people will lose faith in banking. They will be scared to keep their hard earned money in the banks.

But then, where will they keep their money?

When you lose faith in the banking system, you will choose an alternative method like speculation.

You will go to the stock market, but lose money there.

Indians who are known to save money, will start speculating.

Who will make money in the bargain? Speculators like Harshad Mehta.

This government is doing everything to make savings and protecting your savings difficult.

Savings is the social capital of our country which the government uses for the development of the country.

The government must change its policy and encourage public sector banks by giving more capital.

In 2017, then finance minister Arun Jaitley announced an amount of Rs 2.11 lakh crores as recapitalisation of PSU banks. In 2019, another Rs 48,000 crores was announced. But recapitalisation has not changed anything; the NPA crisis continues.

See, you are pouring water into a leaking tub, and water is going to another tub that is kept below the first one.

You have to plug the leak before pouring water into the tub.

So, you take action against the defaulters first, and then do the rest.

There is no problem with the banking industry; employees are working, very good schemes are there and people have accounts in the public sector banks. All the development loans are given by public sector banks only.

The only problem is the bad loans to the corporates and default.

If you take stringent action against them today, they will be afraid to cheat banks tomorrow.

Instead you go on giving capital when money is going out through another channel.

People will also ask, why do you waste tax payers's money like this?

You give money from the bank as loan for productive work, but it should also come back to the banks. Here, it is not coming back.

Do you blame the RBI for the crisis in both the public sector and private banks?
When the RBI is supposed to be the watchdog with its representatives in every banking audit, the question everybody is asking is, how come they didn't see the NPAs for so long?

Yes, the RBI and only the RBI is responsible for the crisis.

The RBI has become a doctor that gives only death certificates to banks when the doctor is supposed to cure the patient.

For example, Yes Bank had an illness. The RBI should have given some medicine when it was diagnosed first. Instead, they waited till it was dying, and gave medicine to revive a dying patient.

This is absolutely ridiculous. There must be a thorough probe on the functioning of the Reserve Bank.

Most of the time, they are acting as the extension counter of the finance ministry.

When it is supposed to be an autonomous body...

Yes, it is supposed to be an autonomous body. Instead of being the guardian of the financial system, it has become an extension counter of the finance ministry.

They knew what was happening to Yes Bank and also in ICICI Bank.

6 to 10 years ago, the loan of Yes Bank was just Rs 40,000 crores to Rs 50,000 crores, but in the next five years the loan became Rs 245,000 crores when their deposit was Rs 210,000 crores.

They were giving loans more than the deposits. Was the RBI not aware of this? What did they do till the last moment?

If the watchman is sleeping, why do you need a watchman?

The finance ministry has come with the solution of merging various public sector banks to solve the NPA problem. Is merger the solution?

Merger is not a solution to the problem when the problem is NPA.

Can the government guarantee that NPA will be recovered by merging banks?

Secondly, they want big banks when big banks are considered to be a risk in the entire world.

If a pussy cat falls, it will get up in a minute and runs away. But when an elephant falls, it will not be able to get up fast.

Big banks means big risks.

The question is, can the government play with people's money, Rs 137 lakh crores of people's money?

It is not the government's money, it is people's money. So, merger is a wrong policy.

It also reflects the double standard of the government. On one side they are talking about Jan Dhan Yojna and banking for all. On the other side, they are closing down small branches in the name of merger.

After the State Bank associate banks were merged with State Bank, they closed down 7,000 branches. They closed down 2,000 branches after the Bank of Baroda merger.

By merging and closing down branches, you are creating unemployment. Recovery of NPA also will go to the back seat.

Service will become poorer. So, there will be no benefit to the country or the people or the employees or the banks.

They are actually making the banks bigger so that they become attractive for private people to buy them! This is just a prelude before selling them.

Is the Indian banking system itself in a very big crisis now?

It is not a crisis now, but if the issue remains unattended, it will lead to a crisis.

The only problem we have now is bad loans. You recover the bad loans and the problem is solved.