Monday, October 26, 2015

PUBLIC SECTOR BANKS WILL NOT DIE

PUBLIC SECTOR BANKS WILL NOT DIE

Apropos to the so called expert view by Ms. Latha Venkatesh today, titled “Banks set to turn less profitable, Some need to die”

I request your expert to first know the statistics correct. 

The number of Jan Dhan Accounts opened so far is 188.6 Million as per Govt of India site and the total number of accounts in our country was 684 million SB accounts in 2013 itself as per Crisil report published in the Business Standard dated 28th June 2013. Today, it is around 900 million accounts and not 210 million quoted by your expert. As on 31st March 2015, SBI itself has 273.2 million accounts.

Your expert is a good TV anchor and she has extracted some useful information shared by 3 bankers who have rightly pointed out that there will be competition and the existing banks will be able to cope up with the competition.
But unfortunately, Ms. Latha Venkatesh ends the article by saying “the midcap PSU banks looks set to die. And this death won’t be a loss but a gain. Even the most ardent proponents of PSU Banks have began to admit that Bank Nationalisation is an unmitigated failure. The advent of payment and small banks may be an opportunity for the country to cleanse out atleast some of these PSU Banks that have become irreparable failures. PSU Banks have been hot beds of political patronage for a very long time which is why I worry if the Govt will have the political will to kill them or let them die. One hopes these entities are not kept alive at the cost of the tax payers money as has been done with Air India.”

Let me remind you that out of the 188.6 million accounts opened under Jandhan only 7.2 million were opened by the Private Sector Banks. Please also recollect what happened to Global Trust Bank which was once lauded as successful New generation private bank. 

Public Sector Banks are capable to face any competition as they have faced earlier also. They are not eating tax payers money. Let me quote an article by Dr. Soumya Kanti Ghosh published in Economic Times on 21st January 2015.

Let me start with the most discussed myth that PSBs are monoliths, which, over the past decade have been repeatedly bailed out through capital injections at the taxpayer’s expense. This is a bizarre data interpretation, to say the least. Consider this simple arithmetic. For the decade ended FY14, cumulative capital infusion into PSBs was at Rs 60,000 crore, but the dividend payout (at 20 per cent) was roughly Rs 64,000 crore and the cumulative income tax paid was around Rs 1.30 lakh crore. Thus, on a combined basis, dividend and tax paid to the government was more than 300 per cent during the past decade.


When the great US Banks failed in 2008 and the crash continued almost across the globe it is because of the Public Sector Banks India did not get into a financial crisis. Let us not forget this.
It is only because of nationalisation of Banks Banking services reached the nook and corner of the country, many Govt schemes became successful, priority sector lending came into existence to help agriculturists, small industries and traders. The credit deposit ratio improved even in the so called backward states and small credit was available to the common man. If not for nationalisation India would have still remained an under developed country. Atleast we are a developing nation now.

Indian Banking System is still under banked as per the following statistics.
 As on 2013 India had only 11.4 Bank Branches per 1 lakh population whereas Australia had 31.8, Belgium 44.4, Brazil 47.3. Bulgaria 61.2, Canada 21.4, Cyprus 97, France 38.8, Italy 68.4, Japan 33.9 , New Zealand 33.3, Spain 85.1, Switzerland 48.8 and United States 35.3 Branches per one lakh population. So our country has still lot of scope for more Banks and more branches.
So I request Ms. Latha Venkatesh to stop spitting venom on Public Sector Banks, though she is an anchor of CNBC TV18 which is owned by Reliance Group. Let your Newspaper show some sense of neutrality and ethics.

D. Thomas Franco Rajendra Dev
President
All India State Bank Officers’ Federation &
Senior Vice President, All India Bank Officers’ Confederation


3 comments:

us ustop said...
This comment has been removed by a blog administrator.
arbind kumar Rai said...

Many persons now says that Bank Nationalisation was total failure.Pvt Banks are doing well then why number of Pvt Banks became sick & merged mostly with Nationalised Banks . Why Reliance Petrol outlet are closed & IOC Bharat Petroleum etc are working . Everybody knows how Pvt Sector Banks managed Low cost deposits by the help of Politicians.Banks are facing recovery of NPA from big industrialist due to politicians.

jainrakesh kumar said...

If the Political bosses heading the Govt. are bent upon using public sector banks as their poll gimmicks, who can save the public sector banks from_________.