Mr Modi, public sector banks are your opportunity for minimum government

PSU banks are burdened with carrying national interests.if they start operating like private banks (minimum deposits limits for ) savings and current accounts and don't indulge in dealing with poor people who crowd the PSUs 'I bet the private banks would be swept away.the private banks do not entertain govt. Lending like kcc,bskp and other unproductive loans for which their profit per employee is more

Dear Vivek, This is the 2nd time recently when I am differing with you. Any situation can be analysed and explained as a positive development or negative simply by manipulating the objective against which it is measured. The 2 metrics chosen by you are important but aren't the only ones. Besides Govt in business being bad doesn't lead to the corollary that private ownership is best. Unfortunately in India due to lack of character of us Indians, we are caught between the devil & the deep sea. When Govt manages a business, we have inefficiency & capricious objectives, while private sector is only concerned with its profits, the country & citizens can go to hell.

I agree that the current financial state of public sector banks is serious which requires serious action as suggested by the RBI Governor. Without going into the reason for the poison in the banking system ( a large part of which is on account of the crony capitalism of the previous government) the mess can be sorted by a three pronged strategy v.i z.

Monetize non core investments and assets
Go hard after the defaulters (start with big fish )
Raise Capital

There should have been an effort to compare the types of business in the area of advances handled by the banks in public and private sector.Public sector banks should not be used for implementing the socialy beneficial projects of the political party in power.All business decisions should be strictly on merits and not based on ideologesies.For providing social benefits ,niche Finnacial Institutions should be organised or created with government funds and these should be under strict control to avoid misuse as is noticed now.

Very Good analysed article.Very informative.The service is very poor in state owned Banks.Some times the staff won't be available on seats even if they are present on duty.The Employees get exorbitant salaries,perks in state owned Banks but the service they give in return is definitely not at par with their salaries.This may take lot of time to change.

Instead of privatizing the PSU banks it would be practical to merge them to 4 or 5 big banks so that there will be minimum protest from unions.

It is ironical, but the fact is that the private sector banks need the public sector banks in order to maintain their own growth and to provde great returns to their shareholders.

The 70% or so market share that the public sector banks command, provides a huge pool of inefficiency that the private sector banks can eat into very comfortably, and very proftably for years to come. This environment makes practically all current private sector banks and future ones like IDFC highly profitable.

Moreover, the executives of the public sector banks who are mostly talented and experienced but underpaid individuals, constitute a ready labour pool from which the private sector banks can cherry pick at will!

Imagine a situation where all public sector banks were privatised in one swell swoop. The differences between the erstwhile public sector banks and the private sector banks would disappear in quick time, the business would get commoditised and shareholders would no longer get the bumper returns thay now do. As is the case in most of the developed countries.

Everybody needs the public sector banks, not just the corrupt political/administrative class and the dodgy industrialists. So too, the employees of the private sector banks (for the fat salaries and bonuses), their shareholders for the abnormal returns, and the employess of the public sector banks (for the security of a government job but at much higher salaries)

Bala

The statement " All politicians when in opposition behave in a opposite way than being in govt be it administrative, economic or governance " . The current examples are land reforms, Delhi statehood and banking sector where contrary views are being taken now.

It is very unfair to compare the PS banks with private ones. Simply because, the PS Banks are riddled with employees lacking in any motivation (but pressure), balance sheets riddled with loans imposed from above (and from political corners) and facilities in their branches worser than a district health centre. With modern banking tools, technology and talent with the private banks, the big business chases them, not PS banks.
What PS banks requires is not financial capital, but a more qualitative human capital. The moment management and staff are relieved from pressures from the majority holder (the government) and when management gets the freedom to deal with the banking assets (incl people), these banks will start yielding results. Else it will be like making these PS banks play cricket on an ancient wrestling akhada!