NEW DELHI: Most problems in the banking sector stem from operational issues and therefore, the public sector banks (PSB) should be allowed the same level of operational freedom enjoyed by the private sector lenders to resolve their issues including the bad loans, said G Padmanabhan, non-executive chairman, Bank of India, on Friday.
“There are limitations with respect to ownerships in PSBs, but those issues can be easily resolved. You give the PSBs the kind of operational freedom that the private sector banks have (to operate freely),” said Padmanabhan at a Banking Conclave organised by Centre of Economic Policy Research in New Delhi.
He added that most of the bad loans in Bank of India are mainly from the infra sector.
Of the 21 state-owned banks, as many as 19 banks posted a combined loss of Rs 87,357 crore during 2017-18 due to various issues including scams and defaults by big corporate houses. The NPAs in the banking sector stood at Rs 8.31 lakh crore as of December 2017.
Only two lenders, Vijaya Bank and Indian Bank, posted profits in the fiscal ended March 2018.
Earlier, SBI chief Rajnish Kumar had said that apart from the banks, the government and even judiciary are all to be blamed for the NPA mess.
Even on Thursday, former Reserve Bank of India (RBI) Governor Y V Reddy had said that the problem with PSBs is the dual control. “PSBs should be either converted into companies and the control should be with the RBI, or it should entirely be under the government,” said Reddy at the third anniversary of Bandhan Bank.
Reddy said the Narasimhan Committee in the 1990s had suggested putting an end to dual control, but it was not implemented.
“There are two aspects to the regulation and supervision of the banks - governance and prudential regulation. The RBI regulates both the governance aspect and the prudential aspect of private sector banks. In case of PSBs, the government exercises all powers relating to governance, leaving prudential regulation to the RBI. This has been identified as… the problem of dual control,” he said.