ZEE Business
ZEE BUSINESS
हिंदी में पढ़ें  हिंदी में पढ़ें
Live TV
Live TV
  • Home
  • Budget 2023
  • Adani Saga
  • Markets
    • Stocks
    • Global Markets
    • IPO
    • Companies
    • Currency
    • Commodities
  • My Money
  • Calculators
    • Income Tax Calculator
    • Home Loan/EMI Calculator
    • Mutual Fund Returns Calculator
    • Personal Loan Calculator
    • Car Loan Calculator
    • SIP calculator
    • Lumpsum Calculator
    • SWP Calculator
  • Videos
    • M Se Market
    • Jeb Zindagi Zaroorat
    • Light Camera Stocks
    • Tech Takes
    • Big Bulls Ka Nishana
    • Paisa Wasool
    • Commodity Ke MrityunjayMantra
    • The Right Property Show
  • Economy & Infra
    • Policy & Initiatives
    • Agriculture
    • Telecom
    • Aviation
    • Railways
    • Retail
    • Roadways
    • World Economy
  • Exclusive
    • Wealth Guide
    • Interviews
  • Auto
    • Cars
    • Bikes
    • Electric Vehicle
    • Commercial Vehicles
  • Tech
    • Mobiles
    • Gadgets
    • Reviews
    • Tips and Tricks
    • Apps
  • Real Estate
    • Home Buyers
    • Builders
  • Axis MF
  • Trending
    • Entertainment
    • Politics
    • Lifestyle
    • Travel
    • Sports
    • Viral
    • Education
    • Jobs
Read in App
Business News » India News

Call for massively scaling down unviable state-run banks

  • Twitter
  • Facebook
  • Linkedin
  • whatapp
  • View in App
Call for massively scaling down unviable state-run banks
Representational image. Photo of a closed SBI branch. Image Source: IANS

Terming performance of state-run banks as "substandard," noted academic Vijay Joshi has called for quick privatisation of viable ones and massive scaling down of those on the brink.

To achieve these the Banking Nationalisaiton Act has to be repealed at the earliest and bring the state-run banks under the purview of the Companies Act, he said.

Calling for a "triple-track approach" Joshi said government should force non-viable state-run lenders to become narrow banks on one hand, and radically reform governance in viable ones by limiting state control in some and quickly privatizing the rest.

"A triple-track approach would be desirable. Firstly, some non-viable state-run banks should be forced to become narrow banks. Secondly, in some viable ones, governance must be radically reformed while retaining state's control.

"Thirdly, some viable state-owned banks should be privatised quite quickly," RBI said quoting Joshi as saying while delivering the 15th LK Jha memorial lecture at the central bank headquarters today.

The emeritus fellow at Oxford also called for quick privatisation saying "there is clear evidence that the performance of public sector banks is substandard. Radical reform is thus imperative, and in this context, quick privatisation surely has a major role to play." Underlining the need for urgent governance reforms, he said while the Rs 2.11-trillion recapitalization will help restore capital adequacy which is needed after the significant haircuts they will have to take in the wake of the balance sheet clean-up, but the governance issues at state-run banks will continue to remain even after this large fund infusion.

"All this is highly commendable. But the basic problem of poor governance will remain after recapitalisation, with a high chance of a return to square one in future." He said to modernise banks and improve their overall efficiency, we clearly need large private sector banks to compete with large public sector banks.

"To achieve this, an essential first step would be to repeal the Bank Nationalization Act and bring PSBs under the Companies Act. It would give government the flexibility to reduce ownership to any extent it chooses," Joshi said.

To privatize or to cede control, government would have to reduce its stake to 25 per cent or even lower, though it could, for a short transitional period, retain a so-called 'golden share'.

Noting that all previous attempts to put real distance between government and the state-owned banks have run into the sand, he said "the ongoing extreme stress in the banking system has raised public consciousness about the dire state of nationalized banks thereby offering a golden opportunity to make a radical departure. The current crisis is too good a crisis to waste."

Calling for competition, Joshi said, "banking is amenable to competition, and not a natural monopoly, so it is not a natural candidate for state ownership." The poor performance of state-run banks has got worse since the 2008 global credit crisis with their stressed advances hitting around 16 per cent compared to about 4.5 per cent in their private sector peers, he noted.

Joshi said this is the result of the way they are governed. "Poor governance stems from the disempowerment of banks' boards by government, which has proved to be impossible to alter in our political culture," he said.

(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)

Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.

TAGS:
state-run banksprivatisationBanking & Financial ServicesEconomy
Written By: PTI
Updated: Tue, Dec 12, 2017
08:28 am
PTI
RELATED NEWS
Bad loans problem can't be solved by banks' recapitalisation Bad loans problem can't be solved by banks' recapitalisation

LATEST NEWS

What is ASM framework in stock market and how it affects traders? Explained

Coal India Dividend 2023: Check record date and payment date

No timeline to remove old tax regime, Revenue Secretary Sanjay Malhotra says

SBI Q3 Results: Net profit jumps 68.5% to record Rs 14,205 crore, far exceeds analysts' expectations

Magh Purnima February 2023: Date, Time, Purnima Tithi, shubh muhurat, puja rituals and significance of full moon day

GST Council to meet on February 18

Kamdhenu Q3 result: Net profit grows 82% to Rs 12 crore

Q3 Results 2023: Paytm narrows loss, IndiGo's net profit soars to Rs 1,422.6 crore

Apple crosses 2 billion active devices, sets all-time sales record in India | Here's what Tim Cook has to say on retail store

Government nod to Vodafone Idea to convert Rs 16,133 crore spectrum, AGR interest dues into equity

  • India News
  • World News
  • Companies News
  • Market News
  • Personal Finance News
  • Technology News
  • Automobile News
  • Small Business News
  • Income Tax Calculator
  • Live TV
  • Videos
  • Photos
  • Author
  • Rss Feed
  • Advertise with us
  • Privacy Policy
  • Legal Disclaimer

Latest Trending Updates

  • EPFO
  • Budget 2020
  • Income Tax Return
  • Auto Expo 2020
  • Home Loan
  • Business News

Trending Topics

  • Income Tax
  • income Tax Calculator
  • 7th Pay Commission
  • Reserve Bank of India
  • GST
  • Latest Business News

Follow us on

zeebiz
zeebiz

Partner Sites

  • Zee News
  • Hindi News
  • Marathi News
  • Bengali News
  • Tamil News
  • Malayalam News
  • Gujarati News
  • Telugu News
  • Kannada News
  • DNA
  • WION
© 2023. India Dot Com Private Limited. All Rights Reserved.
LIVE TV