Left-oriented trade unions in public sector banks have come out against the government’s decision to use World Bank funds to help boost the capital in the hanks, fearing a dilution of ownership.
Last week, the World Bank approved a $4.3 billion loan package to India. Of this $2 billion would be directed to the public sector banks for recapitalisation. Another $1 billion is scheduled to be disbursed next year to the banks.
Recapitalisation is the process through which the balance sheets of banks are infused with cash to strengthen them. This enables banks to withstand the risks associated with lending and extend more loans in line with a higher capital base.
While trade unions, which have a long history of protests against privatisation or reduction of the government’s role in running public sector undertaking (PSU) banks, are opposed to the association of the World Bank – which they traditionally associate with US domination, they have not planned any action against the recapitalisation plan, trade union sources said.
“If the agreement is sealed, we will decide on further course of action,” C.M. Puri, member of the general council of the All India Bank Employees Association representing more than 750,000 employees across the country, told Hindustan Times.
AIBEA is the biggest union of banking employees across the country. “There is no need to take World Bank funds as our banks are already well capitalised,” he added.
The AIBEA said in a note prepared for its members that public sector banks managed “huge and precious public savings.”
“Hence the ownership of these banks should not be diluted. We should not mortgage the interests of our Banks to the World Bank,” an AIBEA note said.
Barring a handful like the State Bank of India and Punjab National Bank most banks are likely to get a share of the funds infusion.
The funds would help these banks to increase their capital adequacy ratio, as also to adhere to the Basel II norms.