BANKS AND SOCIAL RESPONSIBILITY
February
6, 2016
Banks and Social Responsibility
Apropos “PSBs Must Run on
Biz Terms, Free Them from Social Duty: RBI’s Gandhi” (Economic Times, February 6, 2016), though the
caption of the report is misleading, the message Gandhi has conveyed needs
attention from stakeholders and policy makers. He said, to infuse efficiency into
the working of public sector banks (PSBs), “the frictions that hinder the
performance PSBs need to be completely eliminated and they should be allowed to
work on commercial principles even as the costs of social banking have to be
provided for separately. If that is through budgetary support the government
may be more than compensated through increased revenues from and valuations of
PSBs”.
As a regulator, Gandhi is
making the right noises. But the PSBs have not been burdened with social
responsibility all of a sudden. One has to understand the situation in which
banks were nationalised. Nation had taken advantage of the banking network and
their dependence on public deposits to pursue national priorities. Rightly so.
Till early 1990’s Centre had owned up the responsibility to make viable
activities which were not generating adequate incremental income and therefore
not ‘bankable’, by providing various price and subsidy support. When
agricultural loans became ‘NPAs’ for reasons beyond the control of farmers,
banks which had provided credit were compensated through Agricultural and Rural
debt Relief Scheme, 1990 which was fully funded by central and state
governments.
In addition to defence
and internal security, government has to own up responsibility for social
security of the people which include an acceptable level of food security,
universal healthcare, and affordable education and housing. Banks cannot be
entrusted with this responsibility. Economic development alone will not bring
inclusive growth and that is the context in which economists make comparisons
in terms of public spending for certain purposes as a percentage to GDP. Also,
it is the responsibility of government to ensure that private sector earns
profit only after meeting its social responsibility.
M
G WARRIER, Mumbai
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