problem with government banks is that they are government banks

while everyone is counting the exact figure of non-performing assets, no one has taken time to see how messy, obsolete is the slip that is to be attached when depositing cash in a public sector bank. the modus operandi of government banks has led them to where they stand today; india’s so-called gem of banking sector, state bank of india, has posted a quarterly loss for the first time in 17 years.

cut to solution. divestment is the only option to revive indian public sector banks, and yes this can come with challenges hence the need is to think of an appropriate method of divestment.

when divestment is considered, we only think of making a public sector unit private by way of selling the stake of the government. this, however, can be a kneejerk decision. what is the alternative then? form a government trust and handover the stake currently held by government in public sector banks to this trust. yes, it sounds similar to how the tata group operates.

the government trust so created must have as its trustees experts from different spheres. what you call a ‘ppp’ mode of ownership in projects has to be replicated in this scenario. the majority of trustees must come from private sector and the trust in itself should not be considered as child or property of the government.

tasks given to the trust must include rationalization of salaries of personnel in public sector banks and a quick shift from the present modus operandi to functioning in a corporate, professional manner where customer is considered the king, profits are considered the prime target and the enterprise as a whole is run as a corporate venture, not a government enterprise.

the recent fraud unearthed in the pnb’s mumbai branch and central bank’s tough directives on recognizing and resolving bad assets are indicative of the severely bad health of government banks. and accept this, the sector is on the verge of falling into the category of ‘irreparable’.

the only problem is that the modus operandi of our public sector banks has worsened to the core and the banking staff, at every level, is motivated only by high salaries they draw, which in itself is a reason for failing banks.

form trusts and pass over the entire government stake in public sector banks to these trusts (individual trust for every psb) at the earliest to save the backbone of our economy.