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Vijaya Pushkarna
Vijaya Pushkarna

PNB SCAM

Govt should dilute stakes in PSUs to below 50%: ASSOCHAM

ASSOCHAM ASSOCHAM logo | File

Calls upon the industry to ensure 'clean and best banking and business practices'

Public sector banks are clearly spinning down a bottomless pit in terms of credibility, thanks to the way the Punjab National Bank dealt with fraudster Nirav Modi's company accounts. And sharing this lack of faith in the PSU banks is industry and trade body ASSOCHAM, which on Saturday suggested the government dilute all its holdings in banks to less than 50 per cent.

Simultaneously, the body called upon the industry to set certain standards and ensure “a clean and best banking and business practices”.

ASSOCHAM has gone on to suggest that the PSUs should then be allowed to “work on the lines of private sector lenders with a full sense of accountability to their shareholders protecting interest of depositors”.

While the PNB stocks have plummeted, it has taken down with it the value of other big public sector investors, including the LIC, and the asset management companies that have invested in it. The value of premium five-star mutual funds have come tumbling down, affecting thousands of retail small investors.

Industry wanted the Reserve Bank of India (RBI) to engage with the industry in finding ways to do a clean business in the entire financial sector, be it the public sector or private sector banks or even the non-banking finance companies.

“The PSU banks, ironically, are slipping from one crisis to the other and there is a limit the government can keep bailing them out at the cost of taxpayers' money, even if it is the principal shareholder in these lenders” ASSOCHAM stated, reflecting the anguish of those who have been trusting government-backed banks more than the private ones.

ASSOCHAM reasoned that once the government equity in the banks is reduced below 50 per cent, there would be much more autonomy along with accountability and responsibility of the senior management. The boards should then be truly taking the policy decisions, while the CEOs would run the banks with full authority, coupled with the commensurate responsibility, instead of looking towards the bureaucrats for directions, it was suggested.

The industry and trade body felt that the top banking positions are treated as extension of a government job and the senior-most managements spend bulk of their quality time, receiving and implementing directions from the bureaucrats even for innocuous issues. “In the process, the core banking functions, including all important risk mitigation and management, take a back seat. The problem has become more grave with the banking (sector) adopting to new technologies which can prove both boon and bane, depending on how effectively they are implemented,” said ASSOCHAM.

Chamber General Secretary D.S. Rawat said, “There is an onus on India Inc as well. There are two sides of a coin. Any unsavoury incident, leaves both sides of the coin smudged. It is time the industry also did some introspection. While we seek more autonomy for the banks, we, from the industry must also set certain standards for us for ensuring a clean and best banking and business practices".

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