Is privatisation the panacea to all the ills? .....
by V. Viswanathan retired Executive of a PSB ////
"Right from the former governor and deputy governor, every one advocates that PSBs will turnaround much more efficiently, if they are privatised.
One do not get the confidence, if the history is any indicator.
1. Global Trust Bank, failed in its first attempt to merge with UTI Bank, was merged with Oriental Bank of Commerce, an efficient PSB at that time, in 2000
2. Times Bank, a new generation private bank after reforms, was merged with HDFC Bank in 2000.
3. Yes Bank had to be rescued by investment into equity by select banks, with SBI leading the pack with an investment of 49%
4. PMC Bank was placed under moratorium
5. Shadow Banks or NBFCs to be precise IL&FS and DHFL were taken to NCLT by the government/regulator for resolution.
Failure in all the above banks/NBFCs are due to reasons of corporate governance related issues, exposing the depositors/creditors to grieve, if remedial measures were not in place immediately.
In addition, there were serious corporate governance issues in the second largest PvB, ICICI Bank involving alleged conflict of interest in sanction of loans to a big corporate.
While the PvBs had their goals linked to maximising the interests of their shareholders, PSBs were given twin responsibilities -
(i) continue to meet the objectives of the successive governments of different parties and
(ii) also remain viable to comply with the Basel norms arising out of banking reforms implemented.
d. PSBs contributed substantially in financial inclusion and development inclusivity (infrastrcture), the main objectives of successive governments since 2000.
(i) Infrastructure:
Lending to infra, which stood at Rs.7243 cr. in 1999-2000 increased to Rs.786045 cr. in 2012-13. (a compounded annual growth rate of 43.4%over a period of 13 years) and bulk of the lending was undertaken by PSBs. Credit for the growth of infrastructure facilities with particular reference to power, roads, ports rightfully belong to PSBs. Incidentally the share of HDFC Bank, which has the highest market capitalisation among SCBs in India, is negligible in building the infrastructure requirements of a growing Indian economy. Even today, Power and Roads, the two sectors that account for the maximum spend in infrastructure, continue to get their support only from PSBs.
(ii) Agriculture:
Bulk of the lending to Agriculture and allied activities comes from PSBs and RRBs, sponsored by PSBs. PvBs, thanks to the advent of PSLC(priority sector lending certificate), achieve their priority sector targets under Agriculture, by purchase of PSLCs in the market for short periods
(iii) MSME:
As per report on trend and progress of banking in India 2019-20 released by RBI, 60% of MSME lending comes from PSBs (Rs.8.93 lac cr.) with the average ticket size of loan Rs.8.12 lac. (Average ticket size of PvBs is reported at Rs.2.39 lacs)
(iv) MUDRA LOANS:
PSBs including RRBs lead the pack in the PMMY loans (Mudra loans) launched in 2015. (Total sanctions by all the banks in the last five years is staggering at Rs.14.43 lac cr. extended to 27.70 cr. beneficiaries) under the scheme
(iv) Banking in Rural and Semi Urban Areas:
As on 31st March 2020, PSBs have 29201 branches in rural areas as against 6160 branches of PvBs.
Similarly PSBs have opened 27451 and 39551 ATMs respectively in rural and semi urban areas.
PvBs, which account for more ATMs than PSBs in metros (30160 versus 29339) are far behind with the numbers reading at 6046 and 17708 in the respective centres.
(v) Financial Inclusion:
The number of accounts opened under PMJDY in the last five years crossed Rs.41 cr. recently. PSBs accounted for 33 cr. accounts and RRBs, part of PSBs, stands second with 7.2 cr. accounts. PvBs' share in the whole exercise is a mere 3% at just over 1 cr. accounts.
(vii) Demonetisation exercise could not have been completed smoothly, but for the wholehearted involvement of the staff of PSBs. Apart from accepting the demonetised notes, all efforts were made by PSBs to enable the public to withdraw cash from the branch counters as well as off-site ATMs.
PvBs closed their off site ATMs in most places and the cash disbursals from their on-site ATMs was restricted to their customers.
(I am not making a mention about the way the PSB staff served the society during the COVID lockdown period and the credit facilities extended under ECLGS, since the hon'ble FM acknowledged the services in more than adequate measure in her speeches)
The above points are made not as a defence to cover up the poor RoE and RoA reported by PSBs, but only to point out that a considerable amount of time and money is spent by the officials in these banks to implement the policies framed by the government, to achieve inclusive growth in the society.
No comments:
Post a Comment