Home Opinions Has the time arrived for privatisation of public sector banks?

Has the time arrived for privatisation of public sector banks?

The debate regarding socialism versus capitalism, public sector versus private sector has been a persistent one. Whether the state should restrict itself to main responsibilities (law and order, security and providing public goods) or should it also jump into address imbalances in society? After independence, India sought to emulate the Soviet model with the state taking up the responsibility of setting up industries, nationalised private enterprises (like banks and airlines) and took responsibility for the upliftment of poor. However, over a period of time, the socialist model collapsed and India had to go for market reforms and privatisation from the 1990s onwards.

One of the most controversial moves of the erstwhile socialist dispensation is nationalisation of private sector banks. It has been blamed for some of the deficiencies in the banking sector today. Some suggest that the state’s exit from banking business could solve many of the sector’s problems (including accountability and professional management).

Arun Jaitley ruled out any plans for privatisation of banks while speaking at the Global Business Summit that was held in February 2018. But he said that the mood or opinion in favour was gaining credence in the wake of large bank frauds. He added that a large political consensus was required to take up the matter. Jaitley mentioned the moral hazard of losing public money to private sector companies had been taken note of.

- Ad - - article resumes -

Arvind Subramaniam, the chief economic advisor in his recent statement told a channel that India needs to rethink public ownership of banks. While admitting that the governance problems of banks don’t go away with privatisation, they are exacerbated by the fact that the government stands rock solid behind these banks. No matter what the losses are, the banks feel they won’t be shut because of government ownership. The recent plan for recapitalisation of banks with 2.11 lakh crores is an example of the claim. Banks must live with the danger of failure or shutdown if they have to function in a professional manner.

In addition to this, political considerations are taken into account while allocating certain loans because of orders from governments. Privatising the banks would decouple their administration from the influence of the government or political parties in making business decisions.

India’s public sector banks are seeing a high level of stressed assets/ bad loans/ NPAs. The losses due bank frauds are also very high in the Nirav Modi case. Though political mudslinging is ongoing on these two issues, we need to see that the biggest loser is the taxpayer.

Thus, the government must prepare the ground for privatisation of banks in near future if not immediately. This would be a significant reform which will ensure that public money is not wasted if banks incur too much loss in future. Public funds must be used solely for defence, infrastructure and maintaining law and order in the long run (apart from some subsidies). It must not be wasted on sustaining banks which are facing many problems because of borrowers, market fluctuations, frauds, or mismanagement.

Help Opindia Reach Every Indian. Share This Post
We need your support to survive in the media industry. Please consider paying us for the content we produce:

To know more about these payments, please click here.

Big Story

Strange rumours are coming out of Kashmir. Shah Faesal, supposedly, is Doval's stooge.

2019 World Cup Is Here!

Catch the latest on Cricket World Cup as it unfolds, special coverage by Opindia

To Advertise on Opindia.com Click here

Pakistan takes a cue from Congress yet again, asks ‘what happened to Rafale investigation’

In case Chaudhry missed out, the first Rafale jet is expected to be delivered next month.

NDTV’s Interim CEO Suparna Singh resigns with immediate effect

NDTV interim CEO Suparna Singh, whose appointment as CEO was not approved by I&B ministry, has stepped down
Hartosh Singh Bal resorts to factually incorrect details to target Amit Shah

Fact-Check: Unlike Chidambaram who tried to escape from law, Amit Shah resolutely faced trial and was acquitted

Hartosh Singh Bal equated P Chidambaram's disgraceful escape with Amit Shah's tenacity to face the law

Former Pakistan army chief says Pakistan will use Kartarpur corridor to revive Khalistani terrorism in India

Gen Mirza Aslam Beg has said Pakistan army and the government should create trouble for India through Khalistan movement
Imran Khan has defended terrorists on Twitter

Imran ‘Taliban’ Khan goes on a bizarre defense of terrorists who may have infiltrated India disguised as Hindus

If harbouring, nourishing and sending terrorists to India was not enough, Pakistan has now shed all pretence and has been officially using terrorism as its state policy.
Rajiv Gandhi's tenure saw justice, freedom and institutions compromised at every level

No Sonia Gandhi, your husband did not stand for democracy or liberty

Rajiv Gandhi had infamously justified the Sikh massacre by saying, "When a big tree falls, the earth shakes."

Here is how these 7 opinion pieces in 4 days reveal newspaper The Hindu’s legendary level of meltdown and arrogance

Let’s take a look at the opinion pieces published by The Hindu in their print edition, in this week

Read about the P Chidambaram link in the new FIR filed against NDTV by the CBI

It appears that the INX Media case, the new FIR against NDTV and arrest of P Chidambaram are all interconnected.
Pakistan may face a blacklisting by FATF's regional affiliate APG

Pakistan blacklisted: FATF’s regional affiliate APG blacklists Pakistan for failure to curb terror funding

In the APG, there are around 40 parameters of which Pakistan has failed in over 35. There are 11 effectiveness parameters and Pakistan has failed in 10.

McDonald’s India admits to discriminating against non-Muslims, buys only Halal meat for its restaurants

Halal is the Islamic method of slaughter which cannot be carried out by non-Muslims.
Subscribe to Day's Top Stories
[newsletter_form type="minimal"]
- Advertisment -

Latest articles

Connect with us

Help Opindia Reach Every Indian. Share This Post