Financial Daily from THE HINDU group of publications
Thursday, Jun 16, 2005
Money & Banking
Public Sector Banks
Govt offers more autonomy to PSBs
New Delhi , June 15
THE Finance Minister, Mr P. Chidambaram, has said that the Government is willing to give more autonomy to public sector banks, even while making it clear that this will also entail more accountability for such banks.
"We are willing to give banks more autonomy. But with autonomy, hand-in-hand, will go more accountability. More autonomy would mean more accountability, more responsibility and willingness to take on greater responsibility in a growing economy," Mr Chidambaram said after launching through a mouse click the 201 inter-connected ATMs of Bank of Baroda (BoB) here on Wednesday.
Mr Chidambaram pointed out that two weeks ago, he told PSU banks' chairmen that they were not asking him for more autonomy. He had then mentioned that the banks had not come up with any "bill of demands for autonomy."
The Finance Minister said that the chairmen of the PSU banks had promised to get back on this issue by the month-end.
While ruling out privatisation of PSU banks, Mr Chidambaram underscored the need for all PSU banks to become "truly national banks."
Describing BoB as perhaps the largest non-south Indian bank to have the largest presence in the South, Mr Chidambaram said that he had advised the BoB Chairman to continue to ensure that the bank had an all-India presence.
He said that concepts such as the need for truly national banks were getting wider acceptance and felt that with greater debate and discussion, other ideas such as convergence and consolidation would gain acceptance.
"There needbe no fear at all among officers, staff or anyone for that matter that we will privatise our public sector banks. We will never do that. The UPA Government is committed to keeping the public sector banks in the public sector. But we want efficient, large and world-scale banks," he added.
The Finance Minister pointed out that PSU banks would have to grow in size, scale up and raise capital if they were to finance the growing foreign trade and other requirements from sectors such as agriculture, small and medium enterprises (SMEs), self-help groups and students.
"Even for the other requirements (SMEs and self-help groups and students), bank credit has to expand very rapidly. If bank credit is to expand rapidly, it is axiomatic that bank capital has to expand rapidly.
"If bank capital does not expand equally and rapidly, then how can credit expand rapidly? That is the reason I am arguing with bankers and others that banks must grow in size and scale and raise capital," he said.
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