PSU banks: maximum government, minimum governance
The PNB fraud provides an opening for the Narendra Modi government to walk the talk on its 'minimum government, maximum governance' promise. Will it seize the opportunity?
The PNB fraud has turned into a public sector versus private sector debate. A few weeks ago, a public sector bank chairman made a forceful point: it is private companies that have defrauded the banks, it is the private sector who are the “wilful defaulters". That doesn’t speak very highly of governance standards in the private sector. Others have pointed to the Barings debacle, where a rogue trader brought down the bank, and to the financial crisis, brought about entirely by private sector banks. A group of 60 economists have cautioned against using the scam as a pretext for privatizing banks. Since the government in any case has to bail out a failing bank, even a private sector one, why privatize the profits if the losses have to be socialized, so goes the argument.