Make Public Sector Banks Perform and Accountable.

Unless  and until the Public Sector Banks perform, the economy cannot  be expected to perform the way the PM , the IMF and the whole world expect in these days of reform , perform and transform and echoed eloquently in the recently held World Economic Form at Davos. No doubt the banks need recapitalization, but more than that what they need is a professional approach supported by an independent thinking and acting Board, Management and staff and is made accountable to the Regulator first and through the Regulator to the parliament. The expectations from the Boards Bureau were very high and unfortunately along with banks, the Bureau also turned Non Performing resulting in the far below  performance of the economy and its over all potential. The Trust in banks is fast eroding  thanks to their  staggering non performing advances,non accountability of the Boards and the Regulator and lack of independence,functional autonomy and the bail in proposal mooted in the proposed FRDI bill to bail out bad borrowers and bad banks using depositors money.The deposit growth in banks is stagnating and the customer service is deteriorating beyond imagination. Capital formation through household savings is declining due to erroneous tax policies and incentives to save by all means including high cost of living. Periodical recapitalization of banks and tolerance of accumulation of bad loans and write off of loans have been acting as moral hazard and both the banks and borrowers develop a tendency to relax and exploit .The need for banks to perform is paramount and it requires development of bond market to support infrastructure development, capital market reforms to enable banks to resort to take out finance to supplement their own resources and administrative changes to make banks accountable for all their lapses in deposit front, advances area and provision of  Customer service to expand Customer base and retain them.    

Dr T V Gopalakrishnan