How are public sector banks going to compete when foreign banks can buy into private banks? Well, for one, by releasing Indian banks from all sorts of restrictions, bringing down government ownership to a golden zero.
At Bank of Baroda?s centenary year Maharaja Sir Sayajirao Gaekwad III memorial lecture on whether Indian banks are ready to meet the challenges, post-2009, eminent economist, writer, politician Lord Meghnad Desai made an impassioned plea for denationalisation.
?Ideally, the government should help public sector banks compete by denationalising them, at least all except the SBI if they must have a tame bank,? Lord Desai argued, drawing many cheers from the distinguished audience of over a 1,000 economists, academics and bankers. There was more in store. Pointing out that IT and Bollywood had blossomed ? and had put India on the global map ? thanks, especially in the case of the film industry, to the government?s ?malign neglect?, it was time the banking sector was treated likewise.
Once government ownership is reduced, it will put Indian public sector banks on a level playing field with foreign banks coming in, he insisted.
?You can?t let PSBs compete with two hands tied behind their backs. There should be opportunity for consolidation so that we have some serious players.?
Lord Desai also said India should move to full capital account convertibility, ?which will allow access to global financial flows?. No country is immune to risks in financial markets, argued Lord Desai, ?but what we have to know is how to handle the risks and the way in which central banks have handled the 2001, 2004 and 2007 financial shocks, we know if crises occur they can be handled.?
He said the banking sector should learn a few lessons from manufacturing in India, which became globally competitive, once the controls were lifted. ?Manufacturing is a local example of how Indian companies can succeed if they are thrown open to competition.?
Pointing out that China (two of its banks are in the global top 10) had managed to implement its banking policies better, he said India?s economic policy had a clear goal but no serious implementation.
Earlier, Bank of Baroda CMD A K Khandelwal said the bank that had started with a paid-up capital of Rs 10 lakh was now ranked fourth in India and 258 among world banks. IIM Ahmedabad director Bakul Dholakia also spoke on the occasion.
