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
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