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04 October, 2007

Protection of foreign, imperial interests in the name of people’s interests

BANK employees are agitating against the move to merge the State Bank of Travancore and other associate banks in the State Bank of India. Kerala’s Finance Minister, Dr. T. M. Thomas Isaac has extended support to SBT employees. The employees oppose merger because they fear job loss. The reason given by Dr. Thomas Isaac is that merger is against Kerala’s interests. When several Kerala-based banks changed hands neither he nor his party had done nothing to stop it. As an economist, he certainly must know that SBT’s merger is a step that the present situation demands.

I am personally deeply indebted to the All India Bank Employees’ Association, which spearheads the anti-merger campaign. Its leader, the late H. L. Parvana, headed several organizations of newspaper employees too.
In 1973, at his instance, bank employees had staged a vigorous lunch-hour demonstration in pouring rain outside the headquarters of United News of India in New Delhi. It enormously boosted the morale of the members of the weak UNI Employees Union and helped me save my job. While I remain grateful to AIBEA for its fraternal gesture, I am unable to support its present campaign because I believe larger national interests demand the contemplated merger.

At one time I did believe that SBT must be freed from SBI and allowed to develop independently. SBI, India’s largest bank, was putting its officers at the helm of SBT and holding it like a colony. Kerala has a vibrant banking tradition, and I felt SBT could grow fast if it was cut loose from SBI. But the situation has changed. The new situation calls for a new approach.

Globalization has drastically altered the banking scenario. The change it has wrought within the country is reflected in the big strides made by the ‘new generation’ banks. The change it has wrought outside the country is even more spectacular. There is now such intense competition that only big institutions can hold their ground.

Last year, the world’s top 10 banks included three each from the United States and Japan, two from Britain and one each from France and Spain. Japan, which was laid bare by World War II, was able to find a place beside the imperial powers of the past and the present by virtue of its enormous post-war growth. Now China and India are on the fast track. Banks play a big role in facilitating economic growth. While China is leaping ahead in banking through planned measures, India still lags behind. When the Communist Party of China took control of the mainland, the Bank of China was constructing a new office building in Hong Kong. The Communist rulers altered the building plan to make the structure taller than that of the Hongkong and Shanghai Banking Corporation. It was widely seen as a proclamation of supremacy.

The list of the world’s top 1,000 banks, prepared by The Banker, a publication of Financial Times, London, this year, contains 31 from China and 27 from India. While in numbers India is not far behind China, the situation is not such as can make the country proud. Although India accounts for 18% of the world’s population and two percent of the world’s Gross Domestic Product, it has only two banks in the list of Asia’s top 25 banks. As The Banker points out, they are small in comparison with the big Asian banks. The only Indian bank in that list, besides SBI, is the ICICI Bank. This private bank, established in 1994, is less than half the size of SBI, but it has already left behind the 14 banks which were nationalized nearly 40 years ago. Public sector bank employees must find out how and why this happened. They must also look outside India. They will then see mega banks coming up there.

Four years ago, Mizuho Financial Group was Japan’s largest banking institution. When Mitsubishi Tokyo Financial Group, which was in the second place, and UFJ Holdings, which was in the fourth place, came together in 2004 to form Mitsubishi UFJ Financial, it became the bank with the most assets not only in Japan but anywhere in the world. It could not retain that position for long as bigger giants arrived. Now it is in the third or fourth place.

Seven years ago, Bank of China was the only Chinese bank in Asia’s Top 10. The other nine were all Japanese banks. This year there are two Chinese banks in the world’s – not Asia’s -- top 10. The Industrial and Commercial Bank of China (ICBC) is in the seventh place and Bank of China in the ninth. Two other Chinese banks are close behind the top ten: the China Construction Bank (CBC) and the Agricultural Bank of China (ABC). SBI is in the 72nd place.

Here is the information that The Banker provides about Tier 1 capital of top Chinese and Indian banks:

ICBC $59.2 billion
Bank of China $52.5 billion
CCB $42.3 billion
ABC (yet to have balance sheet makeover and IPO)

SBI $9.98 billion
ICICI $4.29 billion

Compared to China’s big banks, SBI and ICICI are midgets. No other Indian bank merits consideration even as a midget. China’s Big Four began growing through fresh capital infusion after the rulers decided that they should become major global players. In the process, they are getting privatized. Foreigners, too, can acquire shares in them. On August 29, two banking experts briefed the members of the Communist Party Politburo on the significance of banking reform. President Hu Jintao said later that there would be more steps to modernize the banking sector.

The decision to merge the associate banks in SBI is part of the effort to raise its ability to compete in the global arena. To attain this goal, other steps like infusion of more capital and enhancement of efficiency are also necessary. Besides SBI, some other nationalized banks, too, needs to be strengthened through measures like merger and expansion of capital base. While this is done, it is quite possible that some of the consequences that the employees fear may ensue. They have the right to use their organizational strength to ward them off. But they must not stand in the way of the changes that national interests demand. Those who cry hoarse about the danger of imperialism subjugating the country must remember that when they oppose the growth of banking institutions they are serving foreign, imperial interests, not people’s interests.
Based on piece published in “Nerkkazhcha” column of Kerala Kaumudi dated October 5, 2007

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