Reject the anti people recommendations with contempt

Raghuram Rajan Committee

REJECT THE RECOMMENDATIONS WITH CONTEMPT

One more committee in the order of Narasimham committee I and II and Verma committee was constituted very clandestinely in August 2007 with wide ranging terms of reference to go into the whole gamut of the financial sector and recommend the changes needed. The details of the recommendations came to surface only after finalization of the so called draft report through a section of the print media. The earlier committees were constituted by the Ministry of Finance; whereas this committee was constituted by none else other than the Deputy Chairman of the planning commission Montek Singh Ahluwalia whose loyalty, as is known to everyone, is more for the IMF-World Bank than our own motherland. This fact clearly reveals what would be the nature of the recommendations. Again the chairman of the committee Raghuram G Rajan, Professor, University of Chicago himself was a former chief economic advisor of the IMF. In the whole committee consisting of twelve executives, the only person from the side of the public sector was O P Bhatt, chairman of State Bank of India. His continuous public pronouncements in favour of privatisation of the public sector banks accorded him the requisite qualification and ensured his berth in the committee.

The committee held nine formal sittings and eleven informal ones most of which were hosted by ICICI Bank and then it was the same bank which provided secretariat to take care of the logistical arrangements. This again is a clear indication about the direction of the recommendations of the committee. The committee did not think it fit to consult, even informally, the trade unions representing cent per cent work force which is an important stake holder.

Expectedly the committee came out with the theoretical formulations clearly favouring continuance of the predatory capitalism and recommendations for wholesale privatisation of the public sector banks and linking the Indian economy with the Global economy without any safeguard.

In the opinion of the committee the United States sub prime crisis is no indication of the failure of the market economy; then in such case the logical conclusion would be to adopt the economic system of North Korea which is totally unacceptable to the committee. Thus the committee comes out clearly in favour of capitalism whatever may be its shortcomings and the socialist economy followed by countries like North Korea is anathema to it. Similarly the South Asian economic crisis witnessed twelve years ago, according to the committee, was not due to any flight of capital but due to poor governance, poor risk management etc. With this upside down understanding of the world economy and drawing a wrong lesson from the South Asian crisis, the committee strongly recommends for Capital Account Convertibility directly linking our economy with the Global economy unmindful of the consequences.

The committee is for discontinuation of Government ownership of the banks. It strongly feels that the Government holding in the public sector banks to be reduced to below 50%. In the meantime the committee feels that small ‘underperforming’ public sector banks are to be straightaway sold in the market. The sale can be to any organisation including the subsidiaries of the Foreign Banks. Taking experience of this, bigger banks can be sold.

The committee wants large international banks to swallow our large public sector banks. But it laments that it is politically unacceptable in the foreseeable future. The committee hints that as the present UPA Government is dependent on the Left Parties for its survival and the Left Parties are ardent supporters of the Nationalized Banking Sector, the multi national foreign banks are not allowed to swallow the public sector banks. As large public sector banks are going to exist for the present, the committee comes out with strange idea that the Boards of these banks are to be reorganized is such a way that more powers are vested with the outside private share holders including appointment and compensation of top executives to the Board. Thus the committee wants the control of the public sector banks to be transferred to private big industrial houses.

While on the one hand the committee is for selling small public sector banks, on the other hand it is for opening more and more local area private banks. At the same time the committee wants the ‘unviable’ co-operative institutions to be closed. The committee observes that in the case of Regional Rural Banks, the wage structure for RRB staff was equalized with their higher wage national commercial bank counterparts, resulting in unprofitable cost structure. Thus the committee is not in favour of public sector banks, co-op banks and RRBs and is clearly in favour of local area private banks. The whole idea is to somehow promote privatisation.

Like earlier committees, this committee is also for throwing the poor to market economy mercilessly and establishing jungle law of ‘survival of the fittest’. That is why the committee wants the interest rates on loans to the poor are to be liberalized; the low interest ceilings are to be totally removed. The committee gives a peculiar meaning to the oft-repeated terminology ‘financial inclusion’. According to the committee this term does not mean expanding credit but access to savings. Therefore the committee recommends for dispensing with priority sector loans to the rural peasants and small traders at concessionary rate of interest.

This committee further recommends for merger of public sector banks with other banks including subsidiaries of foreign banks. Thus this committee is for monstrous growth of the multinational foreign banks at the cost of the public sector banks. The committee is also for outsourcing permanent and perennial jobs of the banks through microfinance institutions and business correspondents.

The public sector banks should be removed from accountability to Parliament is an important recommendation of the committee. Another similar recommendation is to delink the banks from Chief Vigilance Commission. The idea behind this can only be to encourage frauds at the top level.

Thus this committee stands for

# merger of banks

# outsourcing of bank jobs through business correspondents

# closure of co-operative institutions and RRBs in the name of unviability

# sale of small public sector banks

# full control to private share holders in large public sector banks

# opening more and more local area private banks

# privatisation of public sector banks and merging them with multinational foreign banks

and

# Capital Account Convertibility to link our economy with global economy

Apart from these, there are innumerable suggestions and recommendations in that direction. The committee is for a hundred small steps in the direction of privatisation that would collectively go very far.

Therefore let us resolve to reject these anti people and anti employee recommendations with contempt.