For a moment, I could not believe we could have such a report written in year 2014! After seeing what has happened in last 5-6 years, to have a report which says bank governance will improve if we privatise them. Really? Thankfully I am not alone thinking on these lines. As I was writing this piece came across these two EPW articles on similar lines – one (edit piece) and two ( By Prof TT Ram Mohan of IIMA. Prof. TTR nicely titles it as Bank Privatisation by the Backdoor.)
The huge response to this another hyped report from RBI stable is not really surprising. It is not the first report which talks of privatization of Indian Public sector banks. But like all RBI things these days, we are made to believe this is the first such attempt. It is one thing to argue for privatisation of banking based on the premise that government should not be in businesses. But this thing that by moving to private banking way, will lead to better governance is like a big joke seeing how things have been globally. And I don’t even want to talk about the financial engineering to privatise PSBs suggested in the report .
The main point is that public/govt is all evil and private is all fair made sense before the global financial crisis.But it doesn’t make sense now. The kind of governance standards we have seen in the so called doyens of capitalism (read private banks) has been so abysmal that there is no place left to hide. They have mismanaged most things under the sun and have brought enormous damage to the banking sector. These private well run professional banks have not just limited their abuse to their own houses but for the entire neighbourhood as seen in the case of LIBOR manipulation. These private better governed entitites have completely damaged the central tenet of banking – trust. Our PSBs misgovernance standards pale in comparison to the kinds of misgovernance seen in the western world of private banks.
And we still think that mere privatization will help in better governance? Really Sirs?