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Socio-economic conditions not right for privatisation of banks, says SBI chief Rajnish Kumar

Socio-economic conditions not right for privatisation of banks, says SBI chief Rajnish Kumar

According to the SBI chief, privatisation may not necessarily solve the problems the public sector banks face. This includes the NPAs pertaining to public sector banks which stand at Rs 73.3 lakh crore.

SBI Chairman Rajnish Kumar SBI Chairman Rajnish Kumar

Privatisation is often looked upon as a possible solution to the problems plaguing public sector banks in India. Mounting NPAs and recent cases of fraud have made the calls for privatisation even louder. However, SBI Chairman Rajnish Kumar, who took over from Arundhati Bhattacharya, does not think the time is right.

Time is not ripe for large scale privatisation of public sector banks (PSBs) given the current socio-economic conditions in the country, Kumar said today. According to the chief of India's largest public sector bank, privatisation may not necessarily solve the problems the public sector banks face. This includes the NPAs pertaining to public sector banks which stand at Rs 73.3 lakh crore.

Privatisation has not always worked well, and ownership does not matter as there are both good and bad companies in both private and public sectors, he said.

"On banking, my view is that the socio-economic conditions in India as of now are not ripe for large scale privatisation of the banks. May be, you will reach that stage of development in next 50 years if you continue to grow at the pace at which we are growing," Kumar said at the Mindmine Summit 2018, the annual summit of the Hero Group.

PSBs are much more than commercial entities as they have to fulfil social obligations, and that they have done quite well, he said.

Many from the financial industry, however, feel the government should consider privatising PSBs as over Rs 2.6 lakh crore capital infusion in the past 11 years has had limited impact in improving their health.

Several experts, including Chief Economic Adviser Arvind Subramanian and former NITI Aayog Vice-Chairman Arvind Panagariya, had pitched for privatisation of PSBs after a spate of frauds were unearthed in state-owned banks, including the Rs 13,000-crore scam in the Punjab National Bank (PNB).

(With PTI inputs)