PSBs mergers

Please read DBs mergers published in The Hindu Business Line on October 4, 2018

My Response:
Banking reforms
This refers to Dr Yerram Raju’s well-researched piece “Why merger of PSBs is not a good idea” (Business Line, October 4). Reorganization of the banking system was never taken up seriously, though it would have helped India to move much faster on the economic growth path especially from the years of LPG (Liberalization-Privatization-Globalization) which took off in early 1990’s. As regards Public Sector Banks (PSBs) including SBI and its associates, post-nationalization there was no rationale for keeping several identities with no basic differences in the way they functioned.
The problem with committees and commissions appointed by GOI (and this observation is not specific to financial sector) is, even if their membership would give an impression that they are professional, many of the reports are written on dotted lines (like FSLRC report). When the reports are sleek and professional, like Narasimham Committee reports, GOI selects the recommendations which they are comfortable with, for implementation.
While profitability has to be an important consideration while sizing up banks by merger, that criterion may not be amenable to comparisons pre and post-merger for obvious reasons. Just as RBI’s functions and role since inception cannot be compared with those of any major central bank in the world, the use of PSBs as a conduit of credit for development in India has made them a special category deserving special treatment. It is not a crime on the part of governments to compensating them for the losses incurred by participating in lending to priority sectors or penetrating to unbanked areas where the private sector will hesitate to enter.
Banking sector and RBI are being blamed for the unethical handling of resources by ‘rich’ borrowers with the blessings of political leadership. Stories are planted in the media against moves from responsible organizations to chase the wrong-doers. The present chaotic situation on stressed assets front is the result of using public sector as a milch cow for pampering vested interests in the private sector by political leadership. There is no escape from allowing institutions to function professionally within their mandated boundaries if the aim is overall economic development.
M G Warrier, Mumbai

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