Capital problems of statutory bodies and banks

M G Warrier                              

September 11, 2019
Capital problems
The story “Why the Govt owning 90 % of many PSBs is a problem” (The Hindu Business Line, September 11) opens a debate which was overdue. The tables presented by Radhika Merwin along with the piece is thought-provoking. First, after all, whether PSBs are facing problems or not, Centre’s investment in share capital of banks is growing and perhaps giving some annual return, unlike the taxpayers’ money spent for some other purposes. Second, the rising percentage contribution to some banks do not pose issues as raising the authorized capital of individual banks may not pose any legal hurdles.
Just as RBI has got its Economic Capital Framework (ECF) studied by an expert group chaired by former RBI governor Dr Bimal Jalan, GOI and RBI may consider appointing a panel of experts to study the capital and reserves framework of statutory bodies and banks (including private sector banks). The expert panel may make comparisons with international practices and make recommendations keeping in view the Indian context and compliance requirements recommended by international organizations.
So long as banks continue to mobilize resources using the public deposit route, they will not be able to get away from the responsibility to provide need-based banking services including lending to priority sectors. GOI and RBI will have to ensure that all banks get a level playing field to manage their business professionally. From this angle, not only banks, but all statutory bodies and PSUs need a free hand, subject only to transparent regulatory mandates, to manage their resources, personnel and day-to-day administration.
M G Warrier, Mumbai


Popular posts from this blog


The King of Ragas: Sankarabharanam