PSBs provide eight times more for bad loans than private banks

PSBs provide eight times more for bad loans than private banks: Total provisioning made by state-owned banks stood at Rs 43,717 cr, while that of pvt banks was Rs 5,300 cr in Dec '15 qtr


February 15, 2016
Playing with figures

This refers to the report “PSBs provide eight times more for bad loans than private banks” (Business Standard, February 15). It is tough for anyone to rescue public sector banks from the shameful situation they have been dragged into by government policies. Since nationalisation, political leadership has been meddling with the working of public sector banks, using the ‘assumed’ ownership rights, with immunity. The miraculous survival of PSBs including SBI can be attributed to the net interest margins (NIMs) banks in India were privileged to enjoy continuously. Even during the Rajan era, RBI has been merciful when there has been near ‘cartelisation’ when it came to passing on the benefits of lower resources cost as reduction in lending rates.
Judging the performance of banks with reference to provisioning itself is not rational. In this report, the misleading caption exposes the media bias against PSBs. While the caption talks about eight times provisioning by PSBs compared to private sector banks, one has to read the text of the report to find out that PSBs’ share in banking business is three times that of private sector banks. What prevents the private sector banks from increasing their share in business is a riddle policy makers and regulators should solve, at least at this stage, before succumbing to the pressure to again ‘privatise’ public sector banks.
The context of bank nationalisation was refusal of private sector banks to plough back deposits mobilised from small savers to sectors that benefited inclusive economic development. The residual and new private sector banks continued to be selective in providing credit and the social responsibility of banking system was largely met by PSBs. The corporates which did not want to follow the banking discipline used their influence to get credit from PSBs. All these together resulted in differential treatment for public and private sector banks. Given a level playing field and semblance of functional autonomy, the future of Indian banking is still safe in the hands of PSBs.
M G Warrier, Mumbai


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