Banking will be in more crisis this year as public sector banks are flooded with money and they don’t know how to lend. Most public sector banks are keeping the surge in deposits as idle cash and as a liability, incurring a loss, according to CH Venkatachalam, General Secretary, All India Bank Employees Association (AIBEA).
Unless banks are able to deploy it and earn interest, they will get into losses for servicing these deposits. Basically, the Government has bungled on demonetisation and the RBI has ended up playing second fiddle, said Venkatachalam.
Secondly, non-performing accounts (NPAs) have become a problem and banks are not following up. The banks are all focused on demonetisation. So all of this will impact public sector banks’ profitability.
It’s a “lose-lose situation” for PSBs. “Both ways, PSBs will be hit. Money will not come from bad loans, we will suffer, If more deposits are flowing and we cannot lend it, we will lose. This is a big issue for PSBs”.
The remedy to solve the public sector banks mess is a simple one -- make wilful default a “criminal offence” and take criminal action. They (those defaulting in bank dues) have the money but don’t want to repay. Bring the money back. The Finance Minister Arun Jaitley should in the upcoming budget announce that wilful default will be treated as criminal offence. Devidas Tuljapurkar, Joint Secretary, AIBEA, said that demonetisation has suspended the routine banking operations. Neither borrowers are approaching PSBs nor bankers are reaching out to them. Banks are virtually discouraging new deposits.
“March 2017 will be one of the worst years in the history of public sector banking. What is the Government’s approach towards PSBs is not made known. That Gyansangam and Indradhanush has got no relevance now in case of banking,” Tuljapurkar said.
ATMs in most semi-urban and rural areas are non-functional. “If ₹9.4 lakh crore of new money have been pumped into the system, why is there a shortage. There is a gap between what is said from the tower and the ground reality”.
CH Venkatachalam is General Secretary, All India Bank Employees Association (AIBEA) and Devidas Tuljapurkar is Joint Secretary, AIBEA