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‘56 Years After Nationalisation, Corporate Defaulters Still Loot Public Banks’, AIBEA Calls It ‘Daylight Robbery’
All India Bank Employees’ Association warns that despite 56 years of bank nationalisation, public sector banks continue to suffer due to corporate defaults, haircuts, and loan write-offs.
Author: Neha Bodke
Published: 13 hours ago
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On the 56th anniversary of bank nationalisation in India, the All India Bank Employees’ Association (AIBEA) released a detailed circular reflecting on the journey of public sector banks (PSBs). The document highlights both the transformative impact of nationalisation and the persistent structural challenges that threaten public banking today.
A Milestone That Reshaped Indian Banking
According to AIBEA, the nationalisation of 12 major banks in July 1969 marked a turning point. Until then, India’s banking system was largely controlled by private industrial houses. The move shifted the purpose of banking from profit to public service. Over the next five decades, PSBs emerged as the backbone of India’s financial architecture.
According to AIBEA: The Gains Has Been Significant:
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The expansion of rural banking, extension of loans to agriculture and small businesses, and greater credit access to priority sectors are direct outcomes of nationalisation. Public banks became crucial instruments for poverty alleviation, employment generation, and inclusive growth.
Past Bank Failures Justified Nationalisation
AIBEA recalls that before 1969, frequent failures of private banks had shaken public trust. Between 1947 and 1969, over 100 private banks collapsed. Even after nationalisation, from 1969 to 2007, 22 private banks failed and had to be merged to protect depositors. These included Bank of Bihar (merged with SBI), Belgaum Bank (merged with Union Bank), and Global Trust Bank (merged with OBC).
This reinforced the rationale for state-owned banks as a stabilising force in the financial system.
Growing Concerns: NPAs and Corporate Defaults
While PSBs enabled mass financial inclusion, the last two decades have seen a sharp rise in Non-Performing Assets (NPAs) largely due to corporate loan defaults.
Although NPAs appear to have reduced, AIBEA points out that the decline is not due to recovery but due to loan write-offs, provisioning, and one-time settlements.
Haircuts Under IBC – Losses to Public Money
Under the Insolvency and Bankruptcy Code (IBC), several high-value defaulters have settled loans at massive discounts, leading to major losses for banks.
Such settlements, while legally sanctioned, translate into a direct erosion of public wealth since banks function with funds from ordinary depositors.
Provisioning Eating Up Profits
Another challenge flagged is that a large chunk of banks’ annual profits are diverted to provisioning for bad loans.
This trend, sustained over a decade, limits banks' capacity to invest in development lending or improve employee welfare.
Asset Takeovers Raise Eyebrows
AIBEA also highlights recent patterns where NPA-hit companies are acquired by large corporations after deep loan write-downs. One example cited is the acquisition of HDIL’s BKC project by a group company for ₹285 crore against a claim of ₹7,795 crore, a 96% haircut.
AIBEA’s Message: Stop the Daylight Robbery
In its closing appeal, AIBEA urges policymakers, regulators, and citizens to take cognizance of the ongoing erosion of public wealth through loan write-offs and undervalued asset sales.
The circular concludes with a firm message: “Strengthen Public Sector Banks – Stop Privatisation – Stop the Daylight Robbery of People’s Money.”
This slogan captures the union’s call for systemic correction, accountability, and the protection of India’s public banking legacy.
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