Drop unviable plans

Bottom 10 banks cannot become viable under govt control; no amount of capital infusion will suffice

The new committee headed by Arun Jaitley to oversee public sector bank (PSB) mergers should think out of the box. 

First, recognise that the bottom 10 banks cannot become viable under government control and the prevailing PSB culture; no amount of capital infusion by the government will suffice. 

These banks must be sold to private equity funds [PE] with a minimum of 51 per cent holding, with a call option for the government or other PSBs to buy them back after, say, a minimum of five years and a maximum of 10 years at a predetermined price formula. PEs will bring in good capital, invest in technology and adopt best managerial practices.  For this, the Nationalisation of Banks Act, 1969, should be amended — the Loka Sabha can pass it as a Money Bill.

For a model of what PEs can do, look towards the earlier fledging Ratnakar Bank in Maharashtra that was saved by PEs and a team of young professionals. Today, it is in the national reckoning after completing a successful initial public offering at the end five-six years.

P V Maiya, Bengaluru

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