Time for de-nationalisation of banks?

Nikhil Bhave
Saturday, 10 March 2018

One of the most curious and cinema-worthy scams was the Nagarwala case. Rustam Nagarwala, an ex-Armyman and intelligence officer, as per official version, managed to fool an SBI chief cashier by imitating the voice of Indira Gandhi and get Rs 60 lakh. Nagarwala was later arrested and died in jail. 

The recent happenings across various government-owned banks running into lakhs of crores have shaken everybody. Problem is, it isn’t the first, and until something earth-shattering happens, nor will it be the last. After all, it is our money keeping these banks afloat.

Of course, things were not quite like that. Despite everything said about Nehru and his socialistic institutional setup, he had left the banking sector untouched. It was his daughter Indira, who nationalised the privately-owned banks in a swift move in 1969. The argument was that the reform was a need to speed up availability of credit across the country. Also, till then, the banking sector was mainly limited to urban and semi-urban areas. The whole process from issuing an ordinance to passing the bill took just two weeks!

Of course, nationalisation helped the rural areas in gaining access to the banking sector. Reserving credit for priority sectors like agriculture was a big plus-point. Then came the scams.

One of the most curious and cinema-worthy scams was the Nagarwala case. Rustam Nagarwala, an ex-Armyman and intelligence officer, as per official version, managed to fool an SBI chief cashier by imitating the voice of Indira Gandhi and get Rs 60 lakh. Nagarwala was later arrested and died in jail. The cop handling the case also died in a mysterious mishap. The tradition of scamsters robbing the banks and getting away has since perpetuated.

But why is this malaise seen much more prominently in public-sector banks? Because they have no shortage of funds. Anything bad happens, the government will just throw more money instead of drastic steps like restructuring and fixing accountability. Ask any bank official and he/she will tell you some really hair-raising stories about how these defaulters manage to get huge loans and keep getting them even after defaulting.

Here is one eye-watering fact: As per RBI data, non-performing assets (in simpler words, bad loans) of public-sector banks stood at Rs 7,33,974 crore in September 2017. The same figure for private-sector banks was Rs 1,02,808 crore. And as per McKinsey report, the government has infused a capital of as much as $15 billion into the state-owned entities. In other words, the banks are allowing the uber-rich to get away at the expense of the common man. Wait a minute, wasn’t that the main reason for nationalisation? That the banks were catering only to the rich?

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