Lenders' unions oppose new private banks

RBI has received 26 applications for new banking licences; may issue new licences in 2014

The United Forum of Bank Unions (UFBU) - an umbrella body of nine bank unions - has opposed the Reserve Bank of India's move to grant new bank licences. It is also against allowing companies in the banking sector.

In a meeting at Chennai last week, the UFBU said in the name of the new economic measures, public sector banks have become the target and their role is being denigrated and relegated. At the same time, private sector banks are being encouraged, though their past role had never been positive. "UFBU regrets and condemns that efforts are afoot to liberalise the banking sector by allowing the corporates, industrial and business houses to float their own banks in the garb of a new licensing policy," it said in a statement.

It said because India's banking system largely was in the control of PSBs, the country could withstand the global financial crisis in the past decade.

"The UFBU is of the opinion that public sector banks should be further strengthened and expanded to play a pioneering role to meet the challenges to our economy" statement added.

"In the entire world, the mix of business and banking had been an unsuccessful model," the UFBU said in its resolution. "We are concerned that the Reserve Bank of India and the government are trying to hurry up the process of opening the banking sector to all types of private interests, including foreign direct investors," the UFBU said.

India today needs strengthening of the public sector banking with further social orientation, rather than encouraging the profit oriented private sector banking, according to UFBU. It also called on the government to revisit the policy of banking sector liberalisation.

It asked all the bank employees to build a national campaign against granting new bank licences, under the banner of UFBU. RBI has received 26 applications for new banking licences and is expected to issue new licenses in 2014. RBI governor D Subbarao last week in Chennai had said, "We debated extensively on the matter, and the decision to allow corporates to apply for bank licences was done in national interest."