Letters: How to cure PSBs

In the article, "Oh, for a crisis!" (May 28), T N Ninan suggests that public sector banks (PSB) have to be brought out of the present crisis. How to do that is the big question. Let us examine some suggestions from banking experts. One of the radical ones is privatisation. This is not possible in India, considering the strong labour resistance to the proposal. The Narendra Modi government can take a bet on the proposal, at the risk of not returning to power.

Unions cannot be professional in their approach or attitude. Long-term gains and short-term losses do not influence any of the labour leaders. The best the Modi government can do is to sell the idea to labour leaders silently and muster their support. But that is only a wild guess at the moment.

Other reforms comprise infusion of further capital that would spur credit growth. While credit growth may be achieved, there is no guarantee about the quality of such growth.

Here is a suggestion worth considering due to its limited negative outcome: dismantle the entire current middle and top credit management teams in top PSBs. Then, bring talents from private sector banks by offering market-based compensation. There is already an assurance from the central government that it would not interfere in day-to-day banking matters. Even Bank Board Bureau Chairman Vinod Rai has said that credit decisions of top managements would not be questioned. Then be a witness to the credit expansion.

As for deposits, there is no issue: only the asset side of the expanding balance sheet has to be handled with care.

Private sector talents can do wonders to the vulnerable asset side of PSBs' balance sheets. Have only two rules: First, never add big bad assets in future. Second, don't forget rule number one.

K V Rao Bengaluru

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