The government must ensure better supervisory mechanism of banks rather than wholesale privatization. Do you agree with this view? Comment (200 Words)
Refer - Business Line
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IAS Parliament 2 years
KEY POINTS
· As per the stated policy of the Reserve Bank of India, banks cannot be run by industrial houses. Once the industrial houses are excluded, there are no entities that have the required financial capability to take over any of the government banks.
· The market cap of State Bank of India is $54.78 billion as on March 2022., and Bank of Baroda’s $7.04 billion.
· To prevent banks from taking undue business risks using public money, there are checks and balances like Statutory Liquidity Reserve Ratio and Cash Reserve Ratio.
· These apart, they have to adhere to various regulations regarding credit dispensation like group exposure limits, income recognition norms, provision for bad debts, etc. Hence wholesale privatisation is not only undesirable but also dangerous as the public money is involved.
· Banks owned by sovereign government provides tremendous comfort level to depositors. The common man feels that a government bank cannot fail and his money is safe.
· Private banks operate with the sole aim of adding shareholder value whereas government banks also try to serve society and ensure implementation of all government programmes for the social sector.
· Performance should not be measured simply based on profitability or business handled but with the contribution to society, direct as well as indirect.
Manish 2 years
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IAS Parliament 2 years
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