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| Stop Privatising PSBs? | | |
Vinod C. Dixit
It is reported that Bank of Maharashtra, Bank of India, Indian Overseas Bank and Central Bank are on the docket for privatization. No doubt the government is yet to finalise which two of these four will be selected for disinvestment in the financial year 2021-22.
One would have observed that 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.
It would be more appropriate to compare performance over a longer period. Privatization of Banks will worsen the Banking scenario in the country. Today the schemes like Jan Dhan Yojana and MUDRA have been successful because of public sector banks and their rigorous implementation. The government has already privatised IDBI Bank by selling its majority stake in the lender to LIC in 2019 and merged 14 public sector banks in the last four years. 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.
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 public sector bank employees do seem to have risen to the occasion and by and large have been doing a really commendable job under difficult circumstances. There is no doubt that bankers have always performed the task given by the Government right from the time of nationalization. Bankers have always in the past stood like a rock and supported the Govt move and made the Govt scheme successful in its drive. Bankers need good reward for its work. The past history of private sector banks tells the failure. Before 1969, all banks, except the SBI, were in the private sector. Between 1947 and 1969, 559 banks failed.
The functioning of PSB has been criticized by those who want complete privatization of PSB. The need of the hour is strengthening existing banks and branches, making them a hub of all services. The decision of Government to privatise PSBs is totally unfortunate and unwarranted. What we need is to strengthen public sector Banks. Don’t we think the government will have difficulty in providing low-cost financial services to rural and poor sections of society as the private may not like to extend its services to them ? 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 ? |
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