Letter to BS: Long overdue banking sector reforms is the need of the hour

Success of the process of consolidation of state-owned banks depends on the enhanced capability of the RBI to exercise its regulatory oversight and ensure financial stability

The process of consolidation of public sector banks had received a shot in arm with Union Finance Minister Nirmala Sitharaman announcing big and bold steps aimed at redrawing the financial landscape of the country. With the mega merger plan, the number of state-owned banks would be reduced to a dozen. While consolidation offers the promise of economies of scale, the question whether the creation of bigger banks will lead to the emergence of stronger entities will remain, given the challenges in terms of manpower rationalisation, cultural fit and opposition from bank unions. The success of the process of consolidation of state-owned banks depends on the enhanced capability of the Reserve Bank of India to exercise its regulatory oversight and ensuring financial stability. The implementation of long overdue banking reforms with a thrust on infusing transparency and accountability in the functioning of the boards of state-owned banks is the need of the hour.

 

M Jeyaram, Madurai

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