Nationwide strikes in banks across India occurred following the Indian government’s proposal encourage bank mergers and allow increased foreign investment and control of public banks.

The government proposes to divest up to 49% ownership of its twenty-seven public sector banks. It also proposes letting foreign direct investors increase their shareholdings of private banks up to 74%.

Bank unions say there is widespread resentment among bank employees against the removal of a 10% cap on voting rights for foreign investors and against unwanted mergers of the public sector banks.

Finance Minister, P. Chidambaram, ruled out the privatisation of nationalised banks and said they would remain in the public sector, but warned that he wants public sector banks to compete with private sector banks, including foreign banks. “It is only competition that will improve the quality of banking,” he remarked.

“For consolidation, banks must get together to become bigger banks. Smaller banks must be taken over by bigger banks.” he said.

“Currently, though the State Bank of India is the country’s biggest bank, it still ranks at 82 among global banks. We do not figure among the top 10 or 20 of the world banks.

The all-India General Secretary of the National Confederation of Bank Employees, P.K. Patnaik, is worried that efforts to merge banks would drive away ordinary customers. “Even if the top 10 banks are merged together, it cannot compete with the 10th ranked foreign bank in asset. On the other side, no other global bank has as much customer reach and national development initiatives of the [pubic banks] in India.’’ said Mr Patnaik.

This work is licensed under a Creative Commons Attribution-NonCommercial 2.5 License.