Letter to BS: Public sector banks need greater functional autonomy

It is a matter of common knowledge that public sector banks (PSB) are faced with an unprecedented crisis in terms of an unsustainably high level of non-performing loans. While it will need the control and regulatory mechanisms further tightened and successive bout of structural reforms to clear the mess in the system, it is important to understand that banks cannot be entirely blamed for the present picture. The high level of NPAs is due to combination of many factors and some of them are beyond the control of banks. The credit committee decisions taken are based on the current market environment and it is not always that they hold right under all conditions. Conditions, which are fast changing in this increasingly globalised environment due to both internal and external factors. If the private sector banks in similar situations are able to deal with the issues better then why can’t their public sector counterparts, despite all the available infrastructure, do the same? 

PSBs have always been subject to too much interference by the government and undue political influence has created some kind of undesirable climate that needs to be done away with immediately. The crux of the matter is that PSBs need greater functional autonomy in their affairs and level playing field with others to compete. PSBs together control more than 70 per cent of the assets in the banking system and in the coming days, they will have an increasingly larger role to play in shaping up the economy. Minimum government and maximum governance should be the way forward and has to be in 

letter and spirit.  

Srinivasan Umashankar  Nagpur

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