IT'S NOT ENOUGH

CAPITAL INFUSION ALONE WON'T FIX THE PROBLEMS OF PSBs

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.