Need to rethink public ownership of banks, says Aravind Subramanian

I think we are now coming around more to the view that if you want this problem not to recur in the future, we cannot just throw money into a black hole, he said

Chief Economic Advisor Arvind Subramanian on Thursday called for privatisation of state-owned banks, and said after bankruptcy code and recapitalisation, more steps were needed in the banking system to deal with the twin balance sheet challenge.
 
Subramanian’s comments come after the Rs 129-billion letter of undertaking (LoU) scam, which has hit Punjab National Bank (PNB) and other public sector banks (PSBs). The scam has increased calls for privatisation among independent observers. Even Reserve Bank of India Governor Urjit Patel has stated that regulation of banks should be ownership-neutral, and that it is more difficult to supervise state-owned banks.