Our Bureau

Mangalore , Jan. 18

THE All-India Private Sector Bank Officers' Federation, which has opposed the Union Finance Ministry's proposal to increase foreign direct investment (FDI) in private sector banks to 74 per cent, has said that it will affect their working and in turn the sectors dependent on them.

The federation — which has written letters to the Prime Minister, Dr Manmohan Singh, and the Chairperson of the United Progressive Alliance, Ms Sonia Gandhi, urging them not to allow FDI hike in private banks - expressed fears that the FDI hike may lead to instability in the banking sector.

The President of the Federation, Mr T.R. Bhat, said that foreign investors would make way for others when there is a downswing in profitability. Such changes will cause serious instability in the management of the target banks.

Also activities that are unprofitable will be cut down once the foreign owners take over. These banks will cease to cater to the needs of small- and medium-sized personal and business clients. Mr Bhat said the foreign investors-run banks would have a tendency to close down branches in the un-banked and inaccessible centres as they may not generate enough returns on investments. Dismantling of banking network in interior areas may lead to the re-emergence of moneylenders there. The proposed policy would help only the investors and not the other stakeholders such as depositors, borrowers, employees and society, he added.

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