Future of Public Sector Banks

This refers to an article published in Economic Times of 15th September written by Scandita Agarwal.

http://economictimes.indiatimes.com/markets/stocks/stocks-in-news/banking-sector-state-run-banks-idbi-union-bank-pnb-canara-bank-and-dena-bank-a-safer-bet-in-turbulent-times/articleshow/9987991.cms#write

Writer of this article will be surprised when he will see further deterioration in the results of Public sector banks specially five banks named above in forthcoming quarters especially in September 2011.He perhaps reads only the results announced by these banks but he does not know how much they are concocted and manipulated. Now the banks are unable to commit sin and hide bad assets and as per RBI directive they are bound to declare bad assets through on line mechanism and provide for bad assets to the extent of 70% of NPA. In March 2011 SBI results astonished many analysts in India and in March 12 many more PSBs will open their eyes and change their mind set.

Health of PSBs cannot improve until management of these banks learn to respect good and honest officers and punish those who have rose to top position only by dint of flattery and bribery. Humiliation to old officers and giving importance to new generation boys who have knowledge but not experience may result in further fall in intrinsic values of these banks. These banks will have to work hard not only to recover money from defaulters with the help of their ill-motivated team of top officers but will also have to stop bad lending in future to get real success in their fight for survival.

Writer of this article will have to admit that despite levying of huge service charges on customers by private banks, people like to open accounts in private banks and avoid government banks due to rampant corruption as also total in-activeness at all levels. This is why total business of 20 year old new era private banks like ICICI, HDFC and Axis bank have reached the level of 100 year giant size SBI and have crossed the level of many Public sector banks who are in the market for more than 50 years and who have been enjoying many privileges from Government of India and who have been getting additional capital from time to time from the government for their survival and for enabling these banks to fulfill Basel II or Basle III norms.

On the contrary staffs of private banks are loyal to their employer and in return they are awarded by employer for their good work. Flattery and bribery is no where visible in private banks. In PSBs , most of executive are those officers who have committed many mistakes while they were in branch, whose lending is now in the domain of bad assets and it is their dishonesty which has resulted in accumulation of bad assets and erosion of profit.

To add fuel to fire, Politicians of our country are using Public sector banks for their vested interest, they vitiate recovery atmosphere by allowing loan waiver and compromise and it is they who have weakened legal machinery and imposed all non productive works on the shoulder of PSBs. I am not convinced by the views of writer of this article that investors in PSBs are likely to be benefitted more compared to those who invest in private banks.