Despite early start & deeper penetration, PSBs trail pvt banks: Nayak

PSBs are facing a double whammy in the form of lower credit spread and lower fee income than private banks

There is much that still needs to be rectified with the public sector banks vis-à-vis the private sector. Notwithstanding the comparison on size, the private sector banks have been more innovative leading to their success, according to P J Nayak, Chairman of the RBI Committee on Review Governance of Boards of Banks.

The key drivers for success are adaption of technology for operational efficiency, automated transactions channels, better sales and distribution channels and relationship management.

For instance public sector banks own two third of the assets of the Indian banking sector, but generate only one third of returns, Nayak said in his address at Annual Capital Markets Conclave of Indian School of Business (ISB).

Public sector banks are facing a double whammy in the form of lower credit spread and lower fee income than their private sector counterparts. Further it is a fatal flaw to impose the burden of social mandate on select banks. The social responsibility should be shared equally by all banks, private and public, alike, he added.