More than the size of the bank, what matters is the composition and the empowerment of the bank's Board which needs to include professionals without operational interference from the government, said ASSOCHAM President.
problems facing the public sector banks, mainly
centered around close to Rs.5 lakh crore
non-performing assets, ASSOCHAM
President Mr. Sunil Kanoria said a
paper brought out by the chamber clearly
suggests mergers or consolidation of the
PSBs is certainly no answer to the present
crisis, which can only be resolved by
professionalizing these banks with the
government keeping an arm’s length.
Addressing the media, Mr. Kanoria said, “Our paper has also noted that as things stand
today, the boards of the PSBs are not empowered enough to choose a glide path for their
banks. Instead, they need to refer to the Finance Ministry circulars even for mundane things.”
Releasing a study titled ‘Convergence, Not Consolidation Answer for Public Sector Banks,’
along with chamber’sSecretary General, Mr. D S Rawat at a press conference held in
New Delhi said, “If size of the banks had a relationship with the health of the financial
sector, the Chinese banks would have been the healthiest lot. But, the biggest concern
before the global financial community today is the health of the Chinese banks”.
Of the top ten global banks on the S & P Global Market Ranking, the first four are from
China with Industrial and Commercial Bank of China right at the top. Only two American
banks - JP Morgan and Bank of America, figure on the table of top ten and the Wall Street
has no liking either for the size and seems quite disillusioned with the so-called ‘Too Big to
Fail’ concept whereupon it is on the sovereigns to save their banks even if they go reckless
in their business.
“But then, somehow, here in India we have got this penchant for large size to be achieved
by merging different entities”, said Mr. Kanoria. If at all, there is a case for a merger, it is
weak bank merging into strong one; but here we have a situation where there are hardly
strong banks in terms of crucial parameters, large book size notwithstanding.
With some high profile borrowers getting into litigation and facing criminal probes, the public
discourse puts additional pressure on the government, to find some quick fixes for NPA-ridden
banks, which find themselves terribly constrained to improve lending with the credit growth
well below 10 per cent.
More than the size of the bank, what matters is the composition and the empowerment of the
bank board’s which need to include professionals without operational interference from the
government, said ASSOCHAM President.
Unlike the present situation where the Financial Services Division in the Finance Ministry
is virtually the master of the PSBs, the level of the government interface with the banks
should be well-defined and be done only through the Banks Board Bureau (BBB) ,
comprising people of eminence, integrity and domain expertise
There is a case, certainly for synchronization of the businesses among the PSBs. The paper
said there could be a few PSBs which are strong in say, automobile portfolio in a particular
region, say south India. On the other hand, there may be banks which are strong in agro
financing in the same area but are not doing well in automobile finance. The entire portfolio
of auto finance can be swapped. Conversely, same thing can be achieved for the agro financing
portfolio, of course over and above the mandatory priority sector lending.
Sensing an inflexion point, the paper said the technology driven banking is here, right away
and it is only going to increase. In about a year, 17 new banks will begin business. These are
not driven by sheer size; but would leverage technology to reach the un-reached; create new
banking customers, take away existing customers from those complacent about their business
and would redefine the way people at large do their financial transactions.
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