End Of Big Brush Bank Reform

The setbacks are indeed severe, but any attempt to conclude from them that the entire nationalised banking sector has plunged into an abyss will be wrong. Within the overall setback, the healthy banks which have been improving their performance over the last few years, have progressed further down the sunshine road. Other than the State Bank group, this list includes Bank of Baroda, Canara Bank and Union Bank among the large ones and sturdy little small ones like Dena Bank and Corporation Bank. This of course does not include the all time little stalwart Oriental Bank of Commerce.

What is more, as many as four hitherto loss making banks (Allahabd, Andhra, Syndicate and Bank of Maharashtra) have in the last year turned round and recorded nominal profits. So the first lesson is, that all banks cannot be tarred with the same brush. What is more, the rapidly improving health of the leading banks (State Bank of India and Bank of Baroda are planning GDR issues) indicates that the first few generic steps taken to set right the entire sector have been in the right direction. Gradually tightening the income recognition, asset classification and capital adequacy norms, while freeing the banks from the bleeding reserve requirements and paying market rates for the government borrowing, are undoubtly the right initial steps.

 

What the latest upsets indicate is, that generic cures will not do any longer and attention has to be paid to individual banks and special packages designed to meet their specific needs. Much time has been lost in getting this started and as a result those with serious illnesses (that is those which are not simply affected by the general bad weather) are rapidly sinking.

The latest RBI report on