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Introduction
| The Case for Denationalization | Service
Matters | Few
suggestions
Here are a few suggestions:
1. Scrap the Bank Nationalization Act and convert all banks into publicly held companies. The degree of public shareholding does not matter. Whether it is 99.7% or 5% it would be decided with due process.
2. Then it becomes a pure investment by the Government of India and ideology has nothing to do with the ownership.
3. The Government has to decide whether the future ownership has to be professional, as part of groups of financial conglomerates. It then has to decide the quantum of its ownership, that of strategic partners and that of the public.
4. Public ownership should be defined and spread as far and wide as possible with the issue at normal prices and not with extraordinary pricing.
5. The Government and the Banking division should focus on banking issues for the whole economy. The ownership element should be transferred to a separate investment agency under the cabinet secretariat.
6. The Government and Banks should pay more attention to integration that is vital in a modern economy: clearing services, inter bank activities, making the outside service
providers like telephone, computer services, couriers, postal system accountable as well as to ensure a continuous effort towards excellence.
7. Attention to assets that is loans and investments than liabilities that is deposits.
8. Having a close look at interest rate policy, which in my opinion is more crucial in ensuring profitability.
9. Targeting 2 per cent return on assets thereby resulting in a profitability of Rs. 25,000 Crores and become taxpayers for the country.
10. Ensuring that bad loans do not occur in the first place, in the event they occur they should not be on account of internal failures but due to externalities and even they occur due to externalities to deal with such situations swiftly. Cooperate towards working to a sound legal and justice system that protects rights and that are the rights of
Banks as corporates, who work for protecting the interests of citizens (who keep their savings with them) and not for someone else.
11. Become the knowledge source for all aspects of the economy. There is no information that the banker doesn’t know. A banker knows more than Government or any other agency. Such information should be used:
a) In the banks own interest.
b) In the interest of its own customers
c) In the interest of the state
d) In the interest of citizens and
e) In the interest of pure knowledge.
12. The banks should be truly corporate citizens. Their first social responsibility is not to make losses and generate profits which are equal to the rate of return on capital deployed, a fair return for providing for future losses or opportunities, to ensure that it does not run aground and most important to secure future jobs not only those provided in the bank itself but in the economy as a whole.
13. Devote considerable attention on service. I cannot emphasize
more. There is a concept very well grounded. It is called industrialization
of service. Your ATMs are one answer. But much more is required.
14. Banking in rural areas should be a specialized activity, made commercially profitable and
modernized.
15. There is no need for any new institution or new set-ups. The existing banking system itself can be geared for change.
16. There should be a continuous assessment – by Reserve Bank of India, by banks themselves, by institutions and associations, by academia, by retired bankers, by the whole society on the importance of development of sound institutions in banking driven by a good background of theory and grounded in ethics and morality.
Banks must truly become the embodiment of education, organization
and discipline and show it in action. This is more important because, India does not lack in resources but absence of these vital ingredients is preventing us from achieving our production possibility frontier.
The sum and substance of my communication to you is that banks are institutions, which are crucial in any modern economy. No matter whatever jargon is bandied about, Merchant Banking, Investment banking are merely terminology to manage the SURPLUS capital in the world.
Commercial banking is crucial to everyday life. Commercial Banking will never go away. Its content will always remain the same its instruments, receiving and delivery mechanisms may vary. Universal banking, integration are all words which are used to convey that there are possibilities of improving value. But no matter what you say insurance is insurance, banking is banking, investment is investment, saving is saving, capital is capital, loans are loans. To satisfy the human weaknesses of novelty and surprise, the same services are bundled, combined, integrated, mixed and provided. It may work in advanced economies but hide a lot of efficiencies because ultimately they provide value to customers. But in India if at all one thing is common today is bungling and being muddled.
It is up to you to provide the material for clear thinking on the subject. Mangalore should give the lead for setting right what has gone wrong in banking in India. If we have given five major banks to the nation, we also have the pride of saying we have one right bank for the nation.
The dishonesty, corruption, bribery, sloth, inefficiency, procrastination, obstruction, heedlessness that mark today’s service in entirely or in parts should give way to excellence and goodness, probity and safety. Most important it should
symbolize integration without which there would be no gains in economic efficiency.
But again, our aims should not be just right banking for India. India’s former reputation for honesty and integrity should take its logical place. Our goal should be India – Bankers to the World.
Some thoughts on Bank Nationalization
Paper presented at Symposium on Privatization of Nationalized
Banks – Corporation Bank Officers’ Organization (R), Mangalore on 21st July, 2001.
Prepared by : G. Giridhar Prabhu
Prepared on : 17.7.2001
ACHAL INDUSTRIES
190, Industrial Area, Baikampady, Mangalore / 575 011, India
Tel : (Off) (91) 824-408387 Fax : (91) 824 – 408487
Email : achalind@hotmail.com / ggpra@vsnl.com
Website : www.achalcashew.com
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