Time PSBS Had An Image Makeover

Despite significant contribution to the economy, they suffer from a sharp erosion in confidence and credibility

- Bandi Ram Prasad

Public sector banks (PSBs) will now be governed by key performance indicators (KPIs). Given the bad times that these banks are facing now, it might be a welcome move to have such metrics listed and monitored. However, the practice of reviewing PSBs’ performance has been going on for long, undertaken by the Finance Ministry at regular intervals. The value addition, though, could have been limited.

What the government needs to work on more seriously and in a focussed manner is creating a culture for PSBs that could make them distinct and distinguished. PSBs are in pretty bad shape, not just on the bad debts front. They currently also suffer from a sharp erosion in image, confidence, and credibility. Their shortcomings often overshadow their contributions and analysts tracking stock performance generally undermine the importance of these banks.

Surely PSBs do have their share of lapses and pressures, brought out by bad lending decisions and political interference. But the lapses that have come to light in new generation private banks are no less serious.

From the perspective of a predominantly bank-intermediated economy, it is important that public policy on banking should lay due emphasis on the importance of their useful interventions in the development process. PSBs still play a significant role in emerging markets. Of the world’s 30 top banks, nine are state-owned with a combined share of 41 percent of Tier-1 capital, 36 percent of assets and 44 percent of profits.