Letters: Banking on reform

Arvind Subramanian's analysis of the country's public sector banks' woes is quite accurate ("Indian banking: Reform by death", March 8). His suggestion that certain public sector banks could be reformed only by awarding death sentences is proof enough of these institutions' maladies. While he is aware of the practical difficulties of doing so, he opines only some of them should be allowed to fail. However, the entire group, including State Bank of India, needs radical solutions.

All public sector banks will fail when the government stops re-capitalisation. That is the first solution for shrinking their size. Second, the Axis Bank ownership structure (the bank was promoted by Unit Trust of India and general insurance firms) could be emulated for the public sector banks that are doing relatively well. Third, the voluntary retirement scheme could be extended to trim the staff size of certain reasonably good public sector banks. Finally, minority shareholders should seek court intervention to disallow micro-management of these banks by the finance ministry.

K V Rao Bangalore

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