the bjp is in power in most indian states and its feat in the north-east is an evidence that voters are decisively backing the pro-development and reformist stance of the prime minister. so the perfect time to bring long-pending reforms in banking is now.
when indira gandhi brought bank nationalisation in 1969, the move that was although opposed by many in her own party, went down well with the general populace, only because people viewed it as furthering their interests.
even at that time, nationalising banks wasn’t the most preferred action to bring a change in how banks functioned; it was thought that banks were operating as agents of few corporates, while the needs of underprivileged classes were not being paid heed to. the then Indira-led government, prior to bringing the nationalisation ordinance, brought the scheme of social control over banks (which couldn’t last long), where a national credit council was established with finance minister as head and representatives of various stakeholders.
5 decades later, we now stand with a banking sector that is under extreme stress of bad loans.
reason? you may blame rogue staffers for frauds in loans, but the reality is that all public sector banks function like a typical government department where staffers go to work with little sense of duty. if you conduct an audit of a few public sector bank branches, you will find branch managers unaware of rbi directives and orders, junior level staffers unwilling to do their day to day duties.
the extent of inefficiency has risen to levels where government banks have disremembered the fact that banking companies too are corporate entities where you need to earn revenue and make profits to sustain in a competitive setup.
in contrast to this, there is little innovation, and abundance of replicating actions of other players. without even anticipating the success or failure of the move, many public sector banks came up with their e-wallets to compete with the likes of paytm and freecharge. outcome? – all money put into this endeavour has resulted in little success.
still, for this and many other useless and failed decisions, staffers at public sector banks are not accountable to anyone, at the end of the day, they will take home the salaries they are promised. the junior level staffers are even more relaxed owing to high salaries they draw when compared to their private sector peers.
it is time the government forms a committee and accord it a 3-month time to come up with reform measures in public sector banks. this time, make sure that committee recommendations are duly implemented without fearing reprisal from trade unions. the government must make the most of present times when voters are decisively backing its bold policy actions.
how the government can dilute its stake in public sector banks without following the traditional privatisation route should be the broad area of work for the committee. unless you change how banks function, no change in financial results can be expected.