Apropos "Lessons from Gyan Sangam" (March 7), there cannot be two opinions on the need for strong banks in the backdrop of the growing size of India's economy and its international recognition in terms of foreign direct investment flows, non-resident Indians' contribution, its own investments, exports and imports.
This was strongly recommended by the Narasimham Committee in its reports in 1991 and 1998 that got shelved due to bad politics and bad economics. No doubt, forced mergers of banks have caused bad experiences as a result of mixing different cultures and involving huge capital expenditure from the taxpayers' kitty. But they should not come in the way of merging major public sector banks, which are comparatively healthy and strong, instead of combining the weak with strong ones. Besides consolidation of major banks, there is adequate scope for bringing in specialised banks to cater to the growing demands of various segments like agriculture, small and medium enterprises, housing and other retail sectors. The new set of banks licensed by the Reserve Bank of India - payment banks and small banks - can supplement the stronger and specialised banks with emphasis on savings, investments and speedy and safe payments, particularly with a heavy concentration of fast expanding retail segments under Make in India, Start-Up and Digital India. It is time for a new approach to banking. The bad debts crippling the economy must be transferred within a cut-off date to a new escrow account backed by government guarantee.
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This was strongly recommended by the Narasimham Committee in its reports in 1991 and 1998 that got shelved due to bad politics and bad economics. No doubt, forced mergers of banks have caused bad experiences as a result of mixing different cultures and involving huge capital expenditure from the taxpayers' kitty. But they should not come in the way of merging major public sector banks, which are comparatively healthy and strong, instead of combining the weak with strong ones. Besides consolidation of major banks, there is adequate scope for bringing in specialised banks to cater to the growing demands of various segments like agriculture, small and medium enterprises, housing and other retail sectors. The new set of banks licensed by the Reserve Bank of India - payment banks and small banks - can supplement the stronger and specialised banks with emphasis on savings, investments and speedy and safe payments, particularly with a heavy concentration of fast expanding retail segments under Make in India, Start-Up and Digital India. It is time for a new approach to banking. The bad debts crippling the economy must be transferred within a cut-off date to a new escrow account backed by government guarantee.
Read more from our special coverage on "GYAN SANGAM"
T V Gopalakrishnan Bengaluru
Letters can be mailed, faxed or e-mailed to:
The Editor, Business Standard
Nehru House, 4 Bahadur Shah Zafar Marg
New Delhi 110 002
Fax: (011) 23720201
E-mail: letters@bsmail.in
All letters must have a postal address and telephone number