CP Chandrasekhar: India should not emulate US banking model

India should never seek to emulate the banking and investment model that precipitated the 2008 crisis, according to CP Chandrasekhar, economist and professor, JNU, New Delhi.

He said this while speaking at a national seminar organised as part of the sixth triennial general council meeting of State Banks’ Staff Union (SBSU) (Kerala Circle) at Kozhikode.

Ongoing neo-liberal policy reforms in the banking sector are not conducive to democratisation of the sector, he said.

Nationalisation of 14 banks in 1969 was a move in the true tradition of democratisation of the sector. At the time of Independence, credit to agriculture was only two per cent.

Assigning banks the task of nation development from 1969 to 1990 and the geographical and sectoral expansion of credit marked a significant shift in the way business was done.

But by opting for a policy to license new banks ‘on tap,’ the Centre is now reversing the positive and progressive steps taken 45 years back, Chandrasekhar added.

Trade unions, political parties and the general public must explore the issues in detail and strive to protect the benefits the society has earned through years.

Democratic banking provides for system where banks as intermediaries allocate financial savings they control to further the interests of society at large.

There are broadly four objectives that such a banking system would seek to promote.

“First, it must help raise productivity and promote growth to generate surpluses needed to continuously improve the welfare of the majority,” Chandrasekhar pointed out.

Second, it should ensure that savings are allocated in such a way that growth is broad-based. Here, he referred to the tendency to neglect certain sectors, such as agriculture, since the interest the returns it can offer are lower than in the case of others.

Third, banking should be ‘inclusive’ and ensure access to basic financial services including credit; funds must flow to not just smaller units of business but also small individual borrowers.

“Finally, it must be ensured that banks are not rendered fragile or their existence threatened,” he said.

INTUC Kerala President R Chandrasekharan and BMS former national president Saji Narayanan spoke at the seminar.

SBSU President Philip Koshy presided while VK Prasad as moderator. Among those who were present were union leaders TM Prakash; A Jayakumar; K Raja Kurup; and A Raghavan.

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