Letter to BS: Govt should consider a test case for bank privatisation

This refers to the editorial “Proof of concept” (March 21). The state-owned banks made by the successive governments have become a problem to the policy makers. To come out of that, privatisation of public sector banks is not the appropriate remedy. It is illogical to assume that private sector banks are optimally efficient and are conducting business without irregularities, frauds and non-performing assets (NPAs). All financial intermediaries are prone to irregularities and frauds. Since nationalisation, the state-owned banks have been playing key roles in promoting economic growth and social development. Yet, the role of these banks are undermined and establish the need for privatising them so as to hand over the ownership to the corporates.


Barring stray cases, many public sector banks are under-staffed, and the devoted staff are working over-time without adequate compensation. The workforce of the nationalised banks are under severe stress to discharge their duties effectively. During the demonetisation period, the public sector banks seldom got adequate time to expand credit and recovering NPAs. The recent frauds and the rising NPAs are the result of a lack of apt remedial measures. The stakeholders, regulators and supervisors have failed in executing their roles effectively. The measures or schemes executed by the banking regulator have failed to deliver the intended results in improving the quality of the assets of banks.


The fraudsters are enjoying money they have taken away from the lenders. Meanwhile, the blame game is on between banks and the regulator. The recovery of the amount in the frauds is slowly fading. Privatising the nationalised banks, irrespective of test case or otherwise, is not the panacea to the ills that are destroying the financial health and soundness of these banks. It is essential to target the inefficiency of the human capital, the weak or vulnerable systems, rejig the set-up, make regulation and supervision effective and purposeful, and execute proper economic reforms to keep away stresses in the various segments of the economy. A holistic pragmatic solution is the urgent need of the hour.


VSK Pillai,  Kottayam Letters can be mailed, faxed or e-mailed to: 

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