Cut government stake below 50% in banks: Assocham

“While we seek more autonomy for the banks, we from the industry must also set certain standards for us for ensuring clean and best banking and business practices

GN Bureau | February 19, 2018


#Banking   #PNB fraud   #Assocham   #Punjab National Bank   #Nirav Modi  
Representational image
Representational image

The Punjab National Bank's fraudulent transactions worth Rs 11,300 crore should act as a strong trigger for the government for reducing its stake to less than 50 percent in the banks which should then be allowed to work on the lines of private sector lenders with a full sense of accountability to their shareholders protecting interest of depositors, the Assocham said.

"The PSU banks, ironically, are slipping from one crisis to the other and there is a limit the government can keep bailing them out at the cost of taxpayers' money, even if it is the principal shareholder in these lenders,” it said.

“The top banking positions are treated as extension of a government job and the senior most management spend bulk of their quality time, receiving and implementing directions from the bureaucrats even for innocuous issues. In the process, the core banking functions, including all important risk mitigation and management, take a back seat. The problem has become more grave with the banking adopting to new technologies which can prove both boon and bane, depending on how effectively they are implemented,” an official statement from Assocham read.

Once the government equity in the banks is reduced below 50 percent, there would be much more autonomy along with accountability and responsibility of the senior management. The boards should then be truly taking the policy decisions while the CEOs would run the banks with full authority, coupled with the commensurate responsibility, instead of looking towards the bureaucrats for directions.  

Assocham general secretary DS Rawat said, “There is an onus on India Inc as well. There are two sides of a coin. If one side represents the bank managements, the other side, which involve the borrowers, represents India Inc. Any unsavoury incident leaves both sides of the coin smudged. It is time the industry also did some introspection. While we seek more autonomy for the banks, we from the industry must also set certain standards for us for ensuring clean and best banking and business practices.”

He called upon the Reserve Bank of India to take a lead and engage with the industry in finding ways to do a clean business in the entire financial sector, be it the public sector or private sector banks or even the non-banking finance companies.
 

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