PSU banks are clones of each other, need differentiated banks

Reported by: |Updated: May 28, 2018

 

Shamika Ravi, Member, Economic Advisory Council – PMO India

The Government is aggressively looking at recapitalization & restructuring of PSU banks, while PSU banks are juggling between NCLTs for recovery and higher provisions against NPAs.

“PSU banks are clones, there’s need for few large PSU banks with different & dedicated models. The government of India should allow some PSU banks to fail as there is no need for so many PSU banks in the country,” says Shamika Ravi, Member of Economic Advisory Council – PMO India.

PSU banks have been consistently reporting losses and most of the capital that GOI infused since recapitalization has been used by banks for provisions.

“PSU banks have to deal with some fundamental issues like selection of directors, basic governance structure in banks, and how many PSU banks we need in this country. The focus should be shifted to sector-specific banks from a bank catering to all kinds of needs in the economy,” says Mrs Ravi.

India being a financially repressed country needs strong growth momentum. Mere opening of a bank account is not enough for a quality financial inclusion. Also, only PSU banks are catering to financial inclusion. Priority sector lending (PSL) is an undertreated aspect of the financial system in India which needs serious discussions.

“PSU banks were forefront when it came to opening up of PMJDY accounts, whereas financial inclusion has not been on the agenda of private banks. The private sector banks in India treat it as a burden, whereas they should have a share in the priority sector lending to uplift the rural economy,” adds Mrs Ravi.

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