The slew of announcements about new appointees to the PSU Banks is heartening. The names from the private sector are very encouraging. It is surprising (in a positive kind of way) that the government could locate and convince these persons to come over. Full marks to Narendra Modi for this initiative.

I also hope that these new names are given a long enough tenure to make long lasting changes. At the outset, it would be a good thing if the government can disband the trade unions, without which real progress is not possible. Give the new men enough freedom to bring in outsiders to ring in changes.

More important, give the PSU Banks enough freedom to shut down branches. Maybe come out with a formula where if there are five PSU bank branches in a street, maybe three can be shut down. Or just give every bank the freedom to shut down around thirty to forty percent of their branches. You can ensure that no district remains unbanked.

It is possible that some banks may need to shrink their size to become better. It is not a bad thing at all. So far, PSU Bank targets have been driven by deposit growth etc. Make Return on Assets and Return on Equity as goals for the banks to strive. Governments have been using PSU Banks as their agent for social popularism. This must stop. Do not force banks to do things that are counter productive. Loan melas and loan waivers should go. Like DBT, if you have to give a loan waiver, give the money to the farmer and make him square off the loan. Do not impact bank balance sheets for electoral gimmicks.

There are many miles to go. I am sure that the new gentlemen who have been roped in have their job cut out. And they are very capable people and it would be presumptuous of me to offer advice or tips.

This is a good beginning. The damage that 1969 did to banking cannot be repaired overnight. Cheers to a new beginning.

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3 thoughts on “PSU Banks- Winds of Change?

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