Maximum Government and Minimum Governance

The Governance in PSBs  and in the Regulator is maximum by the Government and the result is visible in the functioning of the PSBs and RBI as well. The Reserve Bank has lost its regulatory autonomy and the interference of the Government on the functioning of RBI and Banks has led to the weakening of banks and dominance of Directors appointed by the Government in the sanctioning of loans and isssue of Directives by the Government Instead of by the RBI to banks. It is  also wrong to assume that all is well in private sector banks and everything is wrong in PSBs. The window dressing of Balance sheets and Profit and loss accounts is there in both the PSBs and Private sector banks but unfortunately the borrowers have more freedom to hoodwink the PSBs and get away easily which is somewhat difficult in Private sector banks as there are no Directors on their Board  either from the Government or RBI. Further the so called new generation  Private sector banks have some built in advantages of high tech, free of certain directives compelling them to lend to Prioirity sector, Financial Inclusion and opening of branches in unbanked and non profitable areas in as much as they are applicable to PSBs and above all they are acountable to shareholders.The pattern of lending resorted  to by PSBs and Private Sector Banks also differs and the clientele they have particularly new generation private sector banks are mostly high tech and they are also not concerned with various charges they are subjected to.The level playing field varies a lot and PSBs are always at a disadvantage.Instead of Maximum Governance other than by the Government, there is no Governance both in PSBs and RBI due to Governments' interference particularly in relation to regulation of banks  is a reality and this has to be accepted. Even the transmission of Monetary policy has not been as effective as it was in the olden days because of the interference of the Government in various ways.

Dr.T.V.Gopalakrishnan

(This comment is given in BS against an article Minimum Govenment and maximum Governance that appeared on 27/8/14).