Apropos the editorial, "Lessons from Gyan Sangam" (March 7), the expert committee on public sector bank consolidation should ponder over the innovative structure of banks. Having 20, or in its place, five nationalised banks will not serve the purpose if they do the same type of business, selling similar products and competing among themselves.
Let there be specialised banks: large banks for projects and infrastructure financing and having overseas presence; small and medium enterprise (SME) banks to meet the needs of the SME sector, thus aiding Make in India; retail banks that concentrate on the retail and priority sectors, tax collection and miscellaneous functions such as financial inclusion and subsidy distribution. Let the consolidation be based on the core strength of banks, existing and proposed, and their jurisdiction clearly demarcated.
The capital requirement of these banks should be stipulated. As the large banks would be competing with those around the world, their capital requirement should be according to Basel norms. SME banks would mainly work within India, so their capital requirement could be less than that of the large banks. Retail banks' capital requirement would be the least, as their operations would be local, and they would have government guarantee.
The government has promised to infuse fresh capital of Rs 25,000 crore into public sector banks this year (Rs 70,000 crore by 2019). Instead of giving this capital proportionately, let it be bifurcated into developmental capital and survival capital. The bigger chunk should be allotted as developmental capital and given to large banks and SME banks. Retail banks should be given only survival capital. This way the government would not have to shell out a large amount of funds and yet the social responsibility of public sector banks would be met.
Tilak Gulati, Kolkata
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