IT'S NOT ENOUGH

CAP­I­TAL IN­FU­SION ALONE WON'T FIX THE PROB­LEMS OF PSBs

Business Today - - CONTENTS - By Anand Adhikari

Cap­i­tal in­fu­sion alone won't fix the prob­lems of PSBs

A` 2 lakh crore booty is mak­ing its way to the cof­fers of pub­lic sec­tor banks (PSBs). The fresh cap­i­tal in­fu­sion from the gov­ern­ment will not only boost their abil­ity to write cheques but also help deal with the ever ris­ing pro­vi­sion­ing re­quire­ment for the de­te­ri­o­rat­ing as­set qual­ity.

But cap­i­tal alone can­not fix the trou­bles of PSBs. They need more func­tional au­ton­omy, lesser in­ter­fer­ence, suc­ces­sion plan­ning, ESOPs, in­cen­tives, etc. Currently, there is no per­for­mance man­age­ment or cul­ture of mer­i­toc­racy in state-owned banks. Bar­ring State Bank of In­dia, the CEOs/Chair­men of PSBs are drawn from other banks. They have short tenures and are not par­tic­u­larly ef­fec­tive in driv­ing change. Most PSBs are mir­ror im­ages in terms of cul­ture, prod­ucts and ser­vices and are ac­tu­ally com­pet­ing with each other in the mar­ket.

A Banks Board Bureau (BBB) to mend the PSBs was a path–break­ing step but it has not been able to do much. The gov­ern­ment is try­ing to bring out­side tal­ent to man­age some PSBs but a pro­fes­sional at the top can do only so much when ev­ery­thing else re­mains the same. Ex­perts say there is need to over­haul the whole sys­tem and cre­ate a pipe­line of lead­ers. PSBs are al­ready way be­hind in adopt­ing new tech­nolo­gies and dig­i­tal bank­ing. With ar­ti­fi­cial in­tel­li­gence, ro­bot­ics and API bank­ing trans­form­ing the sec­tor, the PSBs have much catch­ing up to do. Clearly, the fresh cap­i­tal would mean lit­tle un­less the en­tire sys­tem is given a makeover on a war foot­ing.

The gov­ern­ment needs to be care­ful and not force banks to lend to a par­tic­u­lar seg­ment or sec­tor – that de­ci­sion should be left to them. Fi­nance Min­is­ter Arun Jait­ley did talk about an­nounc­ing a re­forms pack­age for PSBs but even if it comes it will be a while be­fore the legacy prob­lems are un­done.

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