Rajiv Lall: Privatisation not a panacea for PSU banks | Business Standard Column

Rajiv Lall: Privatisation not a panacea for PSU banks | Business Standard Column

Also read Rajiv Lall's article published in BS on August 27, 2014.
This is a well articulated piece on the options before GOI for infusing efficiency into the conduct of Indian banking system. Perhaps, the example of Jan Dhan Yojana(JDY) is very relevant if one has to find out the reasons for the inefficient functioning of public sector organizations in general. The JDY which roped in 2 crore new bank accounts within days of announcement of the Yojana had the following salient features:
·         Near total dependence on public sector  banks for implementation.
·         Presuming that LIC will meet insurance cost of 750 crores or more out of its revenues.
Abuse of public sector organizations for achieving near-term political mileage is not a new thing. But, as asserted in the article, such misuse has a cost in terms of profitability, efficiency and workforce morale.
 There has been a concerted effort from vested interests to belittle the achievements of India’s public sector which had been consciously nurtured by successive governments till late 1980’s. Right from Railways, Post,  Defence production, Atomic Energy, Oil sector, Space Research and Banking our public sector organizations were doing well. If only they were given a ‘level playing field’ when private sector was welcomed to participate in captive areas, India Growth Story during the last two decades would have been different with two equally powerful and prospering sectors(public and private).
Why private sector banks in India are not able to improve their share in banking business substantially(their share is much below 30 per cent) should be probed before arguing for ‘privatisation’ of PSU banks. Private sector banks are still reluctant to accept small depositors or small borrowers as clientele even in urban areas, not to speak about their unwillingness to reach out to rural areas.
Ideally, government should not bring down its ownership share below the present level. The effort should be to make additional contribution from investible surpluses with other public sector organizations. For the purpose investment in PSU bank capital should be made attractive by showing that PSU banks also function as efficiently as any good working private sector company. This will need a change in outlook and willingness to bring about drastic changes in management and HR practices. Public confidence in public sector should be restored first.

M G Warrier, Mumbai



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