Inefficient PSU banks in each parameter

Mumbai: In a strong criticism of the performance of public sector banks (PSB), he said that while Rs 4.3 lakh crore of money has entered, each rupee The investment has lost 23 rises as in 2019. The survey also described Indian banks as suffering from 'dwarfism', with only one bank in the top 100, while six are necessary for an economy such as the size of India.

PSBs should be asked to share corporate data with each other through an entity (network) similar to GSTN and to perform data analysis using fintech. PSB employees must have participation through the scheme of stock options for employees at all levels. “Partial ownership of PSB by employees will reduce agency problems. This is because employees who own shares have incentives to increase the market value of the shares.

When evaluating the performance of government banks after completing 50 years of nationalization in July 2019, the government report card on economics said in each performance parameter the PSBs are inefficient compared to their peers.

As of January 2020, every rupee of a taxpayer’s money invested in PSB is fetching a market value of Rs 71 paise. As against that every rupee invested in a private bank fetches a market value of Rs 3.7, which is five times of the return in PSBs.

According to the report, if the market/book ratio of each PSB becomes equal to that of the second worst new private bank, the improvement would win the Rs 9.1 lakh crore government, which is approximately 8.5 times the divestment budget for 2019.

Stressing the importance of banks, the survey said that historically the top five economies have always been backed by their banks. India that becomes a $ 5 billion economy will require that at least eight Indian banks be large enough to belong to the world's top 100. However, credit growth in PSBs has been slow, largely due to its large stock of bad loans. In 2019, PSBs reported gross non-productive assets (NPA) of Rs 7.4 lakh crore, which is 11.9% of their loans. The NPAs of Indian banks, particularly the PSBs, could have been avoided if data and analysis had been used in corporate loans.

While there have been arguments about the social impact of bank nationalization, the survey said there have been multiple factors at work. After noting that rural branches have multiplied by 10 and credit to rural areas multiplied by 20 in the first decade after nationalization, he said that it is necessary to exercise some caution when interpreting that previous trends are entirely caused by nationalization .

“A key confounding factor in such an interpretation is the role played by other interventions around bank nationalization. For example, the government initiated a green revolution and anti-poverty programs. ” To further confuse things, the RBI introduced targeted loan programs, which established priority sectoral objectives for banks and the RBI used formal means and moral persuasion to persuade lenders to achieve their objectives.

Explaining the reasons for the disproportionate proportion of bad loans among PSBs, the report card said that a plausible explanation could be that in the growth phase of the Indian economy between 2004 and 2011, PSU banks increased their loan portfolio, but This credit growth was of suspicious quality.

As for the prospects for banks, the survey highlighted the country's demography and the Jan Dhan-Aadhaar-Mobile combination as the two great driving forces.

Compared to previous reports that drove the dilution of government participation, the survey gave a strong boost to the property of PSB employees. Although the Bank Association of India is negotiating a salary agreement with the unions, he said that the current flat compensation contracts and ex post monitoring pressures by the monitoring agencies, it is not surprising that the staff prefer the security and conservatism to risk taking. Therefore, a part of government participation should be transferred to employees who exhibit good performance at all levels of the organization through ESOPs. The report card boosted lateral recruitment, indicating that professionals with mastery skills in technology, data science, finance and economics are required, given the challenge of fintech.