Stop Praising Private Sector Banks in India

An excellent article on Public Sector Banks (PSB) by Adikesavan , in Business Line newspaper, is worth reading.

The article is important at the backdrop of Yes Bank Fiasco. The article was appropriately titled:

YES, public sector banks aren’t bad at all

I will reproduce here sections which are very relevant for changing the perception about Public Sector Banks:

Public sector banks have time and again provided support to crisis-ridden NPBs, in the form of investment, advice and the supply of talent. Even the administrator in charge of YES Bank is a seasoned SBI Deputy Managing Director, not an NPB veteran.

Article is worth reading. It helps us to understand how we have to view Public Sector Banks differently. Especially from the economic benefits derived from the loan extended to infrastructure projects. The author rightly states:

Here, a comparison with two other sectors in the post 1991-reform period will be in order. When the licences for NPBs were liberalised there was apprehension whether PSBs like SBI will be able to withstand competition. The same worries permeated sectors like telecom and aviation. Unlike the other two sectors, a few banks like SBI have not only withstood the competition but in some areas, even bettered their records. It is apposite now to come to the relevant question of “supporting the economy and fostering development” which is the onus of the PSBs as the Survey states. That they lent heavily for infrastructure development is known. All the major roads, airports and power plants would not have come up but for PSBs. The NPBs played it safe. That the PSBs suffered on account of NPAs in these sectors is a fact. But no economist has measured the development benefits that the loans engendered.

Just one example. The Indore-Ujjain highway is one of the best roads we have. Loans to the road developer became an NPA and were recovered under an OTS (one-time settlement). But the highway is a national asset and eases the way for crores of pilgrims, including during the Ujjain Kumbh Mela of 2016. No NPB funded this asset.

Article source: J Gopikrishnan (Journalist)