This refers to the editorial "Making banks safer" (July 25). The Basel committee of banking supervision is obsessed with only one high-point regulation - capital. It has, therefore, come up with the proposal of further strengthening the capital of banks that are "too big to fail". The Basel committee should have stipulated different safety norms for banks after studying the individual country's banking structure, policies and so on. Even the top five state-owned banks in India are quite small by international standards of assets and liabilities. Further, Indian banks are only plain-vanilla lenders. They do not have the exotic financial products that are found in the US or European banks. No amount of capital cannot take care of the risks arising from such complex financial products.
There is no doubt that our public sector banks (PSBs) suffer from a combination of political pressure and state-ownership. If PSBs get a non-interference chit from the government, that would automatically replace the need for higher capital. Then the responsibility of governance will shift to the bank managements.
K V Rao Bangalore
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
