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Much has been discussed about frauds in the Banking Sector. The statement should be read as frauds committed on the Banking Sector – Harisankar

New Delhi, 27 Aug 2021: All India Bank Employees’ Association invited Shri S Harisankar, a veteran banker and former Managing Director of Punjab & Sind Bank to participate in the AIBEA’s ongoing National Seminar series presenting views of renowned and relevant speakers on the necessity to reinstate Bank Nationalization.  

Shri Harisankar delivered the lecture on – ‘Privatisation of Public Sector Banks: Is it imperative? Have we exhausted all options? Have we tried all options?’

He started his lecture directly throwing light on the ongoing scenario wherein the question of privatization of banks has been gaining currency because a section of the influential society is trying to force the government to privatize the public sector banks and unfortunately, the government is also moving in the same direction.

Talking about the private sector he said, ‘when anyone says, that the Private Sector is efficient in enhancing the shareholder value what that is meant is the value for this minuscule part of the population.’

Highlighting the reasons for the economic slowdown he said, ‘massive failure of projects in the infrastructure sector – mainly, Roads, Ports, Power, and steel resulting in loss of capital for the Private and Public sectors have been the most significant of all causes. Such a massive failure has been ascribed to Crony Capitalism in the Country. 

The Debt to GDP ratio was 58.73% during the FY 2020-21 and the previous worst was 58.86% during 2007-08, 14 years back. 

The argument of disinvestment by the Government is built around this logic. 

The Government of India have infused Rs.350,000 Crore for Recapitalization of Public Sector Banks since 2015-16. ‘What is the impact of this infusion?’ he questioned. All Public Sector Banks have reported healthy Capital Adequacy Ratios as of 31-03-2021.

Sharing the contribution of Public Sector Banks, he said, ’it was the Public Sector Banks, which took up the bulk of the infrastructure lending. The presence of the Private Sector Banks was much limited. PSBs took the risk because investment infrastructure was futuristic and much in need for our Nation’s development. It was the only option to put the economy to a higher mode and sustainable growth. Infrastructure exposure of PSBs as of 31-03-2021 collated from the major PSBs work out to approximately 15-16% of the total advances. It stood at a much higher level at the beginning of the growth phase, about 10 years back.’ 

Bursting the myths associated to Public Sector and Private sector banks performance he clarified, ‘as on March 31-2019 the NPAs in these sectors for PSBs was Rs.739,541 Crore representing 11.60% of the NPAs, while the same for New Generation Private Sector Banks was Rs.183,604 Crore (5.30%).’

Sharing constructive solutions he listed:

–                 It should have been possible for our Country to design a compliance regime, which was robust enough to contain the risk of possible failure but less stringent than the Basel III norms for those Banks, which were not active internationally. 

– Once a fraud in the sector has been identified and reported Banks must be required to make 100% provision on those exposures treating them as loss events (after adjusting against the available financial collaterals eligible as per Basel III norms).

Concluding with the social objective in view he stated, ‘we should not privatise the Public Sector Banks and the socio-economic position of the country and its large number of people in absolute poverty, the presence of Public Sector Banks is required.  

AIBEA national seminar series has enabled some great minds to share productive solutions that once adopted might transform the entire banking sector for good.

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