NEW DELHI: Nobel laureate Abhijit Banerjee on Tuesday advocated reforming state-run banks by reducing Government stake in them to below 50 per cent, after stating that the banking crisis in the country was “frightening”. His statement came shortly after a meeting with Prime Minister Narendra Modi which was described as “healthy and extensive.
Banerjee who was speaking at a conference here after the meeting with Prime Minister Modi, said: “The banking crisis is frightening.” In an obvious reference to several scams and high level of doubtful loans with India’s banks, he said “balance sheets are not picking up enough information.”
Last month itself the Mumbai-based Punjab & Maharashtra Cooperative was placed under regulatory restrictions after it unfolded that the bank had been lending most of its money to one single company in a crony deal, against all banking norms.
However, long before the PMC crisis, Indian banking has been hit by several scandals including a Rs 14,000-crore fraud played out against state-run Punjab National Bank and a shadow banking crisis which saw the largest NBFC IL&FS defaulting on its bond pay-outs. An alarming rise in net bad loans with state-run banks also hit confidence in their functioning, forcing the Government to pump in additional capital.
Banerjee also opined that the Government’s “share (in PSU banks) should be below 50 per cent.” He pointed out India’s bankers besides other woes were also suffering from a “fear psychosis,” as state holding meant several extra layers of checks including vigilance commissions. The Nobel Laureate pointed out that there were sufficient layers of checks and private banks were doing “fine without additional layers” of checks.
Fending off attempts by journalists to get him to speak out against the Government, Bannerjee said in his meeting with the PM, Modi had joked that the media would try to trap him into speaking against the government. “I had a cordial and good meeting (with the Prime Minister. PM Modi started by cracking a joke on how media is trying to trap me to say anti-Modi things. He's been watching TV and he's been watching you guys. And he knows what you are trying to do," the Nobel Laureate said with a smile.
Excellent meeting with Nobel Laureate Abhijit Banerjee. His passion towards human empowerment is clearly visible. We had a healthy and extensive interaction on various subjects. India is proud of his accomplishments. Wishing him the very best for his future endeavours. pic.twitter.com/SQFTYgXyBX
— Narendra Modi (@narendramodi) October 22, 2019
The meting held earlier in the day at the Prime Minister’s residence, was described by Modi as “excellent” where the two had a “healthy and extensive discussion on various subjects. ” The Prime Minister also praised the Nobel Laureate in a tweet by terming Banerjee’s “passion for human empowerment” as “clearly visible”.
Banerjee who has earlier criticized the Modi Government’s handling of an ongoing economic slowdown, calling for a rollback of the corporate tax rate slash and a focus on creating demand by putting money in the pockets of the poor, too described it as an “unique opportunity” which gave him an insight into Modi’s “way of thinking about India” as well as the “thinking behind policymaking.”
He said the Prime Minister explained how he was trying to reform bureaucracy and trying to expose the civil service “to the realities on the ground”.
Modi in a tweet with a picture of the meet said: "Excellent meeting with Nobel Laureate Abhijit Banerjee. His passion for human empowerment is clearly visible. We had a healthy and extensive interaction on various subjects. India is proud of his accomplishments. Wishing him the very best for his future endeavours.”
The Nobel Laureate had, however, earlier warned that the “economy is slowing down very, very fast” and added that “we don’t know how fast as there is a dispute over data.” Indian born Abhijit Banerjee along with his wife and partner in research Esther Duflo, both from the Massachusetts Institute of Technology and their colleague from Harvard, Michael Kremer, won this year’s Nobel prize for Economics, on their “experimental approach to poverty alleviation.”