Investors have made their preferences clear: Good private banks quote at higher multiples of book value, while govt banks quote discounts. This cannot continue.
The disproportionate concentration of bad loans in the government owned banking system has a major role to play in the crisis that India is presently facing.
Finance ministry says the proposed revamp will focus on structural reforms, rate rationalisation & ease of living, & will be deliberated upon in the coming weeks.
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.
Standing up to America is usually not a personal risk for a leader in India. Any suggestions of foreign pressure unites India behind who they see as leading them in that fight.
The author wants the banks to be privatised but is unwilling or hesitant to take a call in black and white . Every government owned bank is doing badly in comparison with the private ones , if that is not conclusive , what will be conclusive ? The author points to problems in private sector banks like Yes bank , DHFL and some have pointed to the banking crisis in the US to point out deficiencies even in the private sector . It is nobodys case that privatization is perfect , it is not , it is much better than government ownership . The amount of taxpayer money that must and is being piifered in Public Sector Banks must be humungous and Chanda Kochar got the sack for diverting peanuts . So there rests the case for privatization .
I beg to differ slightly with the views presented in the article. There have been failures in the private sector too. If you take Aviation industry, Kingfisher and Jet are very big failures. In the telecom sector, Reliance(ADAG) and even Tatas have not not done well. In the lending business failures have been galore. Failure of Global Trust Bank is a prominent example. It’s recent incarnation is Axis Bank, which is undoubtedly a strong private sector bank. But here too rather sudden exit of its ex-MD Shikha Sharma was witnessed. Chanda Kochhar, ex-MD of ICICI Bank is facing CBI investigation. Yes Bank is in trouble so are NBFC lenders IL&FS and DHFL. Failure of the banking system in USA was witnessed in 2008 and American government had to come forward to bail them out. Thus ownership is not the issue. Nor are the norms for priority sector landings. The fault line is about lending to big corporates and funding big ticket projects. The earlier system of Term Lending Institutions has lapsed and at around two decades ago, PSU banks and some Pvt Sector banks have replaced them. Funding long term loan assets with short term funds had created many issues. Failure of big ticket projects and corporates is the reason for massive accumulation in NPAs. Those private sector banks who restricted to retail lending are doing fine. Hence, the fundamental issue is not who should own banks but who should fund long term big ticket projects and how. We had no answer to this two decades ago, nor do we have a viable remedy now. Until such time we devise an institutional framework to address this issue, the crisis will continue.
Who will let go of Alladin’s magic lamp … This Jersey cow is now running seriously short of milk. Selling PSBs was the right thing to do in 2014, as it does in 2019. We can put off the agony for some more time, at cost to the fisc and even more to the economic revival India so desperately needs. Mrs Gandhi’s economic orthodoxy, wrapped in a fancy saffron shawl, is not what India needs. Because the reforms of 1991 were not built upon and deepened / broadened, India has continued to lag its true potential, falling ever further behind its principal competitor and adversary. However, we have not seen the wheels coming off, as now seems to be happening. If India needs a crisis to reform, that warmth is building in the fireplace. Privatisation of banks will be one of many long delayed reforms that will be forced upon a India by the sheer force of circumstances. With such a dazzling mandate, we should be driving desired change instead of merely responding out of compulsion.
The author wants the banks to be privatised but is unwilling or hesitant to take a call in black and white . Every government owned bank is doing badly in comparison with the private ones , if that is not conclusive , what will be conclusive ? The author points to problems in private sector banks like Yes bank , DHFL and some have pointed to the banking crisis in the US to point out deficiencies even in the private sector . It is nobodys case that privatization is perfect , it is not , it is much better than government ownership . The amount of taxpayer money that must and is being piifered in Public Sector Banks must be humungous and Chanda Kochar got the sack for diverting peanuts . So there rests the case for privatization .
I beg to differ slightly with the views presented in the article. There have been failures in the private sector too. If you take Aviation industry, Kingfisher and Jet are very big failures. In the telecom sector, Reliance(ADAG) and even Tatas have not not done well. In the lending business failures have been galore. Failure of Global Trust Bank is a prominent example. It’s recent incarnation is Axis Bank, which is undoubtedly a strong private sector bank. But here too rather sudden exit of its ex-MD Shikha Sharma was witnessed. Chanda Kochhar, ex-MD of ICICI Bank is facing CBI investigation. Yes Bank is in trouble so are NBFC lenders IL&FS and DHFL. Failure of the banking system in USA was witnessed in 2008 and American government had to come forward to bail them out. Thus ownership is not the issue. Nor are the norms for priority sector landings. The fault line is about lending to big corporates and funding big ticket projects. The earlier system of Term Lending Institutions has lapsed and at around two decades ago, PSU banks and some Pvt Sector banks have replaced them. Funding long term loan assets with short term funds had created many issues. Failure of big ticket projects and corporates is the reason for massive accumulation in NPAs. Those private sector banks who restricted to retail lending are doing fine. Hence, the fundamental issue is not who should own banks but who should fund long term big ticket projects and how. We had no answer to this two decades ago, nor do we have a viable remedy now. Until such time we devise an institutional framework to address this issue, the crisis will continue.
Who will let go of Alladin’s magic lamp … This Jersey cow is now running seriously short of milk. Selling PSBs was the right thing to do in 2014, as it does in 2019. We can put off the agony for some more time, at cost to the fisc and even more to the economic revival India so desperately needs. Mrs Gandhi’s economic orthodoxy, wrapped in a fancy saffron shawl, is not what India needs. Because the reforms of 1991 were not built upon and deepened / broadened, India has continued to lag its true potential, falling ever further behind its principal competitor and adversary. However, we have not seen the wheels coming off, as now seems to be happening. If India needs a crisis to reform, that warmth is building in the fireplace. Privatisation of banks will be one of many long delayed reforms that will be forced upon a India by the sheer force of circumstances. With such a dazzling mandate, we should be driving desired change instead of merely responding out of compulsion.
Agreed.