Divest / Privatize PSU Banks in India

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Is has been reiterated a number of times by experts that it is no business of the government to be in business. Rather the Government should concentrate in improving the social well-being of the citizens of the country. The resent blow to the banking sector by the PNB (₹11400 crore) / OBC (₹400 crore) fraud case, fleeing of the promoter of the Kingfisher group (NPA of ₹9000 crore) and the sellout of the loan book to Bhushan steel (₹60000 crores) to name a few are not being considered as a lesson by the Ministry of Finance. Recently, the apex authority has also identified 40 groups which are on the verge of bankruptcy and a major threat to the functioning of the banking Industry.

On the contrary, the ministry is siphoning the Tax Payers funds in the form of Recapitalization of the inefficient & ineffective PSU banks by announcing ₹25000 crores in the last Financial Year and a whopping ₹211000 crores recently. As per the data extrapolated on the IBA website the summary of the performance of the 92 Foreign, Private & PSU Banks has been displayed.

The table clearly reflects the incompetency of the PSU banks to survive on their own with the largest size of the asset book the Capital Adequacy as per Basel III after deducting the Gross NPA stood at as low as 5.17%. This implies that how the public deposits are being siphoned away to benefit a few set of borrowers without due diligence and ability & willingness of repayment of the Credit from the banking system. The Market Capitalization to Total Assets Ratio clearly points towards the reliability on the reported figures of the PSU Banks.

Considering that the market has the capacity to judge the performance better than the watchdogs available with the Ministry, it therefore behoves the ministry to start thinking seriously over the Disinvestment / Privatisation of all the PSU Banks and leave it on the people of the country to judge / regulate the performance and viability of these banks.

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