Fifty years ago, on 19 July 1969, the Indira Gandhi government had nationalised 14 banks. Even today, PSUs control a substantial percentage of the deposits.
The economy is showing steady expansion, with the IMF forecasting growth of 7.3 per cent in the fiscal year through March 2019 and 7.5 per cent in the next.
For all their colonial underpinnings, postcards from Hyderabad also inadvertently preserve a trace of local memory: a glimpse of a street, a face, a forgotten name.
Indian toymakers are now exploring new markets, but they want govt to negotiate a trade deal with US soon, introduce incentives and subsidies to make the industry more competitive.
The project is meant to be a ‘protective shield that will keep expanding’, the PM said. It is on the lines of the ‘Golden Dome’ announced by Trump, it is learnt.
Now that both IAF and PAF have made formal claims of having shot down the other’s aircraft in the 87-hour war in May, we can ask a larger question: do such numbers really matter?
1. I think ownership of Public Sector Banks (PSBs) is not at all the core issue; it is how we manage these banks. 2. One can understand why the Union government has no other option but to provide funds to boost capital of PSBs. 3. But let us face the bitter truth: providing money to PSBs towards their diminishing capital is just a temporary measure, as financials of almost all PSBs are very weak. 4. When UPA was in power it had appointed a committee to suggest revamp of PSBs. Former CEO of UTI Bank Mr. P J Nayak, who as we all know was, before joining UTI Bank a senior official in the Union Finance Ministry (UFM), was head of this committee, which duly submitted its report with its recommendations. Unfortunately, however, then Union Finance Minister and UFM officials did not consider implementation of any of the recommendations of P J Nayak Committee. 5. Subsequently, when NDA came to power in 2014, Union Finance Minister, in consultation with PMO perhaps, decided to set-up a new authority called Bank Boards’ Bureau (BBB), which it was initially thought would act as a think tank. Idea was that PSBs will be benefited by advice of BBB. This did not happen. We know why this has not happened: it is to be noted here that UFM officials have finessed art of interference in PSBs, irrespective of which party is in power, and they won’t allow anyone to curb their powers of interference. This is the truth. 6. Unfortunately, right now the banking regulator Reserve Bank of India too appears helpless. Therefore, I feel that to deal with PSBs’ current problems, UFM and RBI can jointly sign Memorandum of Understanding with Boards of each of the PSBs. Boards of PSBs can be given autonomy, after deciding clearly limits of autonomy, which would be with accountability.
It is wrong to blame bank nationalisation done 50 years ago for the present crisis in the public sector banking. Strictly speaking, the crisis doesn’t pertain to government owned banks alone, but to all banks who heavily lend to the corporate sector. Bank nationalisation mandated banking system to go for priority sector lending under various schemes. But that has no harmed balance sheets of PSU Banks to any significant extent. What has harmed PSU Banks and heavyweight private sector Banks like ICICI and Axis is big ticket loans given to corporates and the demise of term lending institutions. Commercial Banks, whose mainstay should be in short-term working capital loans have now entered in a big way to grant medium term and long term loans. This is the root cause of today’s banking crisis. As against this scenario, banks who excel in retail lending are doing fine. In the last two years, the trend is that corporate lenders have restrained themselves in expanding its wholesale big ticket loans portfolio and have shifted to retail lending. Even when interest rates have been lowered, this trend. has not not been reversed. The consequence is the slowdown in the economy. In the meanwhile, the financial position of many PSU Banks has improved and their NPAs have been considerably reduced. Applicability of strict lending norms, more particularly the leverage ratios, better appraisal skills and monitoring is the only way out to come out of this imbroglio.. Cautious approach has to continue and corporates should think of alternate routes to fund their their big ticket projects. Resorting to Bond market could be one of the solutions.
Banks can lend to who they wish to and how they wish to, as long as they are not allowed to pick the tax payer’s pocket. Banks should be allowed to go bust, for their wrong decisions, not propped up by tax payers money. Right now India’s PSBs have become a conduit to channel funds from tax payers into the pockets of bankers, politicos, bureaucrats and crony capitalists.
Perfect summation, sir. A scholar would say this in a three hundred page thesis and earn a doctorate.
The binge – partly to counter 2008, but much more to promote infrastructure- that has caused almost terminal damage to the PSBs was exceptional. However, this does not mean the these government owned banks have been flying high for half a century. Always burdened with social sector obligations, financial repression, plus lots of good natured phone calls from Delhi, as the owner of 85, declining now to about 70, per cent of the banking system in a developing economy, the government ought to have been awash with dividends and bonus shares. Not periodic calls for mid air refuelling, about 2.7 trillion in the last three years. 3. The IBC is a worthwhile reform, which will have to be further refined in light of experience gained. Beyond that, nothing of note, some tinkering at the margins with stuff like Bank Boards Bureau. IDBI Bank is a particularly egregious example of doing the wrong thing. Or the election oriented MUDRA. Nothing except privatisation will work. Japan has zombie companies. We might end up with a zombie banking system.
1. I think ownership of Public Sector Banks (PSBs) is not at all the core issue; it is how we manage these banks. 2. One can understand why the Union government has no other option but to provide funds to boost capital of PSBs. 3. But let us face the bitter truth: providing money to PSBs towards their diminishing capital is just a temporary measure, as financials of almost all PSBs are very weak. 4. When UPA was in power it had appointed a committee to suggest revamp of PSBs. Former CEO of UTI Bank Mr. P J Nayak, who as we all know was, before joining UTI Bank a senior official in the Union Finance Ministry (UFM), was head of this committee, which duly submitted its report with its recommendations. Unfortunately, however, then Union Finance Minister and UFM officials did not consider implementation of any of the recommendations of P J Nayak Committee. 5. Subsequently, when NDA came to power in 2014, Union Finance Minister, in consultation with PMO perhaps, decided to set-up a new authority called Bank Boards’ Bureau (BBB), which it was initially thought would act as a think tank. Idea was that PSBs will be benefited by advice of BBB. This did not happen. We know why this has not happened: it is to be noted here that UFM officials have finessed art of interference in PSBs, irrespective of which party is in power, and they won’t allow anyone to curb their powers of interference. This is the truth. 6. Unfortunately, right now the banking regulator Reserve Bank of India too appears helpless. Therefore, I feel that to deal with PSBs’ current problems, UFM and RBI can jointly sign Memorandum of Understanding with Boards of each of the PSBs. Boards of PSBs can be given autonomy, after deciding clearly limits of autonomy, which would be with accountability.
It is wrong to blame bank nationalisation done 50 years ago for the present crisis in the public sector banking. Strictly speaking, the crisis doesn’t pertain to government owned banks alone, but to all banks who heavily lend to the corporate sector. Bank nationalisation mandated banking system to go for priority sector lending under various schemes. But that has no harmed balance sheets of PSU Banks to any significant extent. What has harmed PSU Banks and heavyweight private sector Banks like ICICI and Axis is big ticket loans given to corporates and the demise of term lending institutions. Commercial Banks, whose mainstay should be in short-term working capital loans have now entered in a big way to grant medium term and long term loans. This is the root cause of today’s banking crisis. As against this scenario, banks who excel in retail lending are doing fine. In the last two years, the trend is that corporate lenders have restrained themselves in expanding its wholesale big ticket loans portfolio and have shifted to retail lending. Even when interest rates have been lowered, this trend. has not not been reversed. The consequence is the slowdown in the economy. In the meanwhile, the financial position of many PSU Banks has improved and their NPAs have been considerably reduced. Applicability of strict lending norms, more particularly the leverage ratios, better appraisal skills and monitoring is the only way out to come out of this imbroglio.. Cautious approach has to continue and corporates should think of alternate routes to fund their their big ticket projects. Resorting to Bond market could be one of the solutions.
Banks can lend to who they wish to and how they wish to, as long as they are not allowed to pick the tax payer’s pocket. Banks should be allowed to go bust, for their wrong decisions, not propped up by tax payers money. Right now India’s PSBs have become a conduit to channel funds from tax payers into the pockets of bankers, politicos, bureaucrats and crony capitalists.
Perfect summation, sir. A scholar would say this in a three hundred page thesis and earn a doctorate.
The binge – partly to counter 2008, but much more to promote infrastructure- that has caused almost terminal damage to the PSBs was exceptional. However, this does not mean the these government owned banks have been flying high for half a century. Always burdened with social sector obligations, financial repression, plus lots of good natured phone calls from Delhi, as the owner of 85, declining now to about 70, per cent of the banking system in a developing economy, the government ought to have been awash with dividends and bonus shares. Not periodic calls for mid air refuelling, about 2.7 trillion in the last three years. 3. The IBC is a worthwhile reform, which will have to be further refined in light of experience gained. Beyond that, nothing of note, some tinkering at the margins with stuff like Bank Boards Bureau. IDBI Bank is a particularly egregious example of doing the wrong thing. Or the election oriented MUDRA. Nothing except privatisation will work. Japan has zombie companies. We might end up with a zombie banking system.