In the wake of the Reserve Bank of India cancelling the licence of Paytm Payments Bank, the All India Bank Employees Association (AIBEA) has demanded the nationalisation of all private sector banks, arguing that the episode exposes deeper flaws in India’s banking architecture.
In a statement issued on April 26, AIBEA General Secretary C H Venkatachalam said the collapse of Paytm Payments Bank is not an isolated institutional failure but a reflection of a “defective” payments bank model and the risks posed by private ownership of banks handling public deposits.
The union said the payments bank framework, introduced following recommendations of the Nachiket Mor Committee in 2013, has struggled to prove viable. Several entities that received licences either shut down or never commenced operations, while others faced regulatory action. According to AIBEA, the inability of such banks to undertake lending — a core revenue-generating activity — has made the model structurally weak in a competitive financial system.
Flagging the human and economic impact, the union said more than 14,500 employees and around 66,000 business correspondents linked to Paytm Payments Bank now face uncertainty. It added that nearly 9.5 crore customers, many of them in rural and underbanked regions, depended on the bank’s network for basic financial services.
The AIBEA also raised questions of accountability, asking whether the failure should be attributed solely to the bank’s management or partly to regulatory design and oversight. It called for a comprehensive review of the payments bank model by the RBI.
Sharpening its pitch, the union reiterated its long-standing demand for nationalisation of private banks. It argued that banks, which collectively hold vast public savings, should remain under state control to ensure depositor protection. The union pointed to past instances where private banks required moratoriums or mergers with public sector lenders as evidence of systemic risk.
“The safest course is to keep banking under the public sector,” the statement said, adding that nationalisation remains the most effective way to safeguard depositors’ interests.
The demand comes at a time when the role and sustainability of differentiated banking models, including payments banks, are under renewed scrutiny following the exit of Paytm Payments Bank.