Stepping up the offensive against the Modi Government, Congress President Sonia Gandhi has directed top party brass to vigorously oppose the moves for Banks Privatization during the upcoming Monsoon Session of Parliament, commencing on July 19.
The Banks Privatization requires to be taken to Parliament. The Banks Nationalization was done in 1970 and in 1980. The initial Banks Nationalization was done through the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, which now needs to be amended, in order to privatize the banks.
Relevant Banks Privatization Bills are not listed in the initial list of 17 Bills proposed by the Modi Government, for consideration and passing in the Monsoon Session. But since the Government is firm on Banks Privatization, it can bring the Bills to Parliament anytime during the Monsoon Session.
The Modi Government may either amend or repeal the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and 1980.
In the run-up to the Monsoon Session of Parliament, Congress President Sonia Gandhi, who is also Chairperson of the Congress Parliamentary Party, convened a meeting on July 14 to identify the issues to be raised and devise the party strategy on the floor of Parliament, with the view to intensify and sharpen the attack on the Modi Government.
Sonia Brainstorming
The meeting called by Sonia Gandhi, which lasted more than 90 minutes, shortlisted the issues that the party will be taking up in the Monsoon Session. These include gross mismanagement of the Corona Virus pandemic, repeated Fuel Prices Hikes and that of LPG Cooking Gas Cylinders Prices, Farmers Agitation, and the Sino-Indian Border situation. Sonia Gandhi also directed the party leaders to target the Modi Government on the issue of Corruption in the purchase of Rafale Fighter-Aircraft.
Finally, the Banks Nationalization legislation could be passed in Parliament only in 1971. Now, 2021 marks the Golden Jubilee Year of Banks Nationalization.
Ironically, in this Golden Jubilee Year of Banks Nationalization, Modi Government is pushing hard for Banks Privatization, which defeats the very purposes of economic and social changes, for which it was brought about.
Banks Nationalization Ordinance was signed and Promulgated by Acting President V V Giri on July 19, 1969, after which he resigned to contest the Presidential election as an Independent backed by the Congress-led by Indira Gandhi and won the election, defeating the official Candidate Neelam Sanjiva Reddy.
Banks Nationalization Ordinance was challenged in the Supreme Court, which quashed it. With Judiciary halting her in her tracks, she opted for Mid-Term Election in 1971.
Progressive Agenda
Indira Gandhi firmly believed that while democracy has indeed come to stay and proved itself in the country, economic freedom in the shape of economic self-reliance, as also improvement in the daily lives of the common people was yet to be achieved. That is why embarked upon radical measures.
It was only after her spectacular and stunning victory at the hustings in the Mid-Term Election in March 1971 that Indira Gandhi managed to push through the Banks Nationalization Bill in Parliament.
At the heart of Banks Nationalization was the issue of reorientation of credit policies. Primarily it was meant for the common weal.
Nationalization was not an end in itself. It was meant in the main to open up the banks to the teeming millions of people. The driving idea was to reduce the social and economic inequities and inequalities, in order to usher in an egalitarian society.
During an interaction with leaders, intellectuals, and youth on one of her visits abroad, they wondered aloud with Indira Gandhi that if they were unable to bring about changes, what course history would take. That was also the great question before Indira Gandhi. Amid mounting expectations among the people, Indira Gandhi was forced to forge ahead with her Progressive Agenda.
Banks Nationalization also sent popular expectations soaring. Indira Gandhi pointed out how Nationalization is an opportunity and a challenge for the banker to recast himself, or herself, in a dynamic and innovative role. Rural Banking, she said, in particular, will require new techniques and methods.
Addressing the Bankers Club in New Delhi on August 28, 1969, Indira Gandhi said, “The attitudes of conventional and conservative banking will not be enough if banks are to foster and enlarge the oncoming Agricultural Revolution and to benefit from the substantial incomes, which it is generating in the rural areas. To mobilize rural savings, you will have to work hard to develop new services, which will suit our farmers and make them save more and part with their savings. On the side of lending also, new ideas will be essential. You will have to innovate in respect of security requirements. Clearly, the traditional insistence on collateral security or documents of land ownership will be self-defeating.”
Apparently, the voting rights cap of 10 percent for a non-Government shareholder, irrespective of his or her shareholding, is a hindrance for the privatization of public sector banks. So, the Modi Government is mulling whether to repeal the Banking Companies (Acquisition and Transfer of Undertakings) Acts of 1970 and 1980 (Nationalization Acts). The voting rights cap of 10 percent for a non-Government shareholder, irrespective of his/her shareholding is among the key constraints identified by the Modi Government.
The stipulation in the Banking Regulation Act, 1949, that no shareholder of a banking company – PSB or Private Sector Bank – can exercise voting rights more than 26 percent is also being reviewed.
Conflicting Visions
The Modi Government carried out elaborate Inter-Ministerial consultations to draft the legislative changes required for privatisation of public sector banks (PSBs). The plan is to opt for amending all the relevant laws in one go so that the process of PSU Banks Privatziation is not hindered by legal hurdles.
In her Budget Speech in Parliament on February 1, 2021, Union Finance Minister Nirmala Sitharaman announced the Modi Government plan to privatize two PSU Banks and one General Insurance Company in the current financial year.
This is seen as part of a larger process to privatize more PSU Banks.
What is at stake is the two conflicting visions. While one is for enlarging and expanding Banking Services for the Farmer, Youth, and Small Entrepreneur, the other is for making Bank Credit more easily available for the crony capitalists.