Wednesday, June 16, 2021
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Don’t privatise PSU banks

Recently our Finance Minister Arun Jaitley has said that the increasing overdue loans given by the banking sector pose a grave threat to the economy. Apropos to this Bharat Jhunjhunwala commented that, “The PSBs must be privatized, and the management of the banks must be handed over to private individuals who stand to gain or lose according to the performance of the bank.”  PSBs have an important development role.  The current management of most PSBs are as good as that of private banks. In fact, it is the level of NPAs which to a great extent differentiate between a good and a bad bank. In fact high level of NPAs in Indian banks is nothing but a reflection of the state of health of the industry and trade. Comparing the performance of PSBs and private sector banks at a time when PSBs are weighed down by the problems of the economy at large is no fare. It would be more appropriate to compare performance over a longer period. Privatization of Banks will worsen the Banking scenario in the country .It is terrible that the Indian banking industry, considered to be one of the strongest in the world has now to face the problem of NPA because of wilful defaulters and political pressure. It is certainly not fair to blame banks for lending huge amounts to Vijay Mallya despite his failing business. Political interference in decision-making in public sector banks is the root cause of the NPA mess. As far as publishing the list of defaulters is concerned, bringing such details under the purview of the Right to Information Act is a more viable option. A wide range of academic studies points to a trend towards convergence in performance of PSBs and private banks since banking sector reforms were set in motion in 1993-‘94. The functioning of PSB has been criticized by those who want complete privatization of PSB. No doubt privatization of banks will lead to the profit driven approach for short time but on that path would it be possible to implement financial inclusion and other Government schemes which is one of the top agenda of RBI?

Vinod C. Dixit

(The views expressed by the author in the article are his/her own.)

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