Letters: Restructure PSBs

Apropos the editorial, "Seven steps forward" (August 17), perhaps for the first time after 1993 - when the PV Narsimha Rao government took bold steps to revive the economy - a host of measures have been initiated by the Bharatiya Janata Party-led government to make public sector banks (PSB) more efficient.

PSBs should be given more autonomy so that they know their strengths and are able to identify niche areas, devise strategies to build up their strengths and remain focused on goals.

It is fine that the government has decided to go for capital infusion. But the quantum of capital infusion proposed is inadequate, considering the PSBs' requirements over the next four years to ensure regulatory compliance with Basel III norms and funding for their business expansion plans. Possibly, the entire capital would go towards mitigating non-performing loans and stressed assets and cleaning up the balance sheets of PSBs.

PSBs will need more capital for expanding their balance sheet size. It is estimated that they will require an additional capital of Rs 4 lakh crore by 2019, which works out to around Rs 80,000 crore every year. As to where the government will get this amount from is a different matter.

PSBs should be allowed to lend and not be bogged down by their non-performing assets. This does not mean that recovery of loans or, for that matter, credit monitoring should be taken away from them. Recovery of loans is necessary to keep the wheels of business rolling. If raising capital is a constraint, the best way out is to hive off bad loans to a special purpose vehicle/asset reconstruction companies.

The formation of a bank bureau comprising professionals would be most welcome as that would lend credence to the system. Implementation, of course, would be the key.

Srinivasan Umashankar Nagpur

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