Group of economists oppose call for PSU bank privatization
Economists point out that private banks are even more prone to scams and failure, as the financial sector is rife with information asymmetries and market imperfections
New Delhi: A group of over 60 economists has expressed concerns over calls from various quarters to privatize state-run banks in the wake of the recent Rs12,636 crore scam involving Punjab National Bank.
“It is worth noting that even a scam as large as the present one has not led to a widespread run on PNB and other banks. This is because of the state guarantee that still generates trust in the public banking system,” they said in a statement.
“At this juncture, it is critical to focus on effective regulation and supervision of all banks, and to make the regulatory process stricter as well as more transparent and accountable. Using this crisis to privatize public banks will only make matters much worse,” the statement added.
They pointed out that “private banks are even more prone to scams and failure, as the financial sector is rife with information asymmetries and market imperfections.”
Economists who are signatories to the statement include Prabhat Patnaik, professor emeritus, Jawaharlal Nehru University; Abhijit Sen, former member, Planning Commission; C.P. Chandrasekhar, professor, Jawaharlal Nehru University; and Jayati Ghosh, professor, Jawaharlal Nehru University.
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