Lower government stake for higher gains3 min read 07 Mar 2016, 10:27 PM IST
Strategic disinvestment will restart the all-important process of privatization
Finance minister Arun Jaitley argued at the bankers’ conclave late last week that India needs strong banks instead of a large number of them. Public sector banks (PSBs) are facing serious issues of asset quality and are now being widely recognized as a potential impediment to economic recovery. Bankers at the conclave were in favour of constituting an expert committee to explore possibilities of consolidation among PSBs—something that the recently constituted Banks Board Bureau under former comptroller and auditor general of India Vinod Rai will also look into. There are valid questions as to how weak banks will be consolidated to strengthen the overall banking universe, but the positive part is that the government is willing to consider ideas and move forward. And that brings up perhaps the most important question: Why should the banking sector remain dominated by government-owned banks, which at the macro level also affects efficient allocation of capital, among other things?