Panagariya makes strong case for privatisation of PSBs

Former NITI Aayog vice-chairman Arvind Panagariya has made a strong case for privatisation of public sector banks (PSBs), with the exception of State Bank of India, saying political parties serious of forming a government in 2019 should include the proposal in their manifesto.

Panagariya, currently a professor of economics at Columbia University, said the predominance of scandals and non-performing assets in PSBs was only one albeit important reason for privatisation of PSBs.

“I firmly believe that privatisation of all PSBs, except perhaps the State Bank of India, should be on the election manifestos of all parties who wish to present themselves as serious candidates to form the government in 2019,” he said in an interview to PTI.

Panagariya was replying to a query related to the recent banking frauds, including nearly ~130 billion at Punjab National Bank.

The economist said efficiency and productivity, too, demand that the government relinquish its control of the large number of banks whose market valuation has dwindled despite the fact that they hold the bulk of the deposits. He said it is disingenuous to argue, as many advocates of PSBs do, that achieving social goals of lending requires two-dozen banks in the public sector. “The fact of the matter is that private sector banks have often performed better than public sector ones in delivering on their priority-sector-lending obligations,” he said.

Asked to comment on recent trade tensions, with US President Donald Trump targeting India, Panagariya said he would not hesitate to liberalise India’s trade further, rather than risk the United States closing its markets to Indian goods.

“Privatisation of all PSBs, except perhaps SBI, should be on the election manifestos of all parties who wish to present themselves as serious candidates to form the government in 2019”