As per reports in Business Standard, “Call for paring Govt stake in Public Sector Banks, diluting the Government’s stake in them and leaving their regulations to the RBI were among the key new ideas discussed by the bankers and experts at a brainstorming session steered by the Finance Ministry on Friday to improve state-owned lenders’ efficiency and governance. Experts and bankers advocated for further dilution of the Government’s stake and for more powers to be given to the boards of the banks which would lead to the smooth functioning of the PSBs.”
As per the press release of the Ministry of Finance, the program featured seven panel discussions, three expert sessions, a fireside chat and open house sessions covering themes such as customer experience, governance, purposeful innovation, credit growth, risk management, workforce readiness, technology modernisation and national priorities.
The press release also says, “It was further emphasised that PSBs should aspire to evolve into globally competitive banks with the scale, presence and capabilities to support Indian enterprises overseas and stand alongside leading financial institutions worldwide.”
Mr. M. Nagaraju, Secretary, Dept of Financial Services chaired the session. CEA V. Anantha Nageswaran, Mr. J. Swaminathan, Dy. Governor, RBI attended along with a number of retired bankers. The so-called experts were from private companies including Google, Microsoft, ServiceNow etc. Pooja Jain Gupta, MD of stationery manufacturer Luxor Writing Instruments, and Sonali Kulkarni, Country Head BFSI, were among the experts. What they would advise PSBs is everybody’s guess.
Indian Exporters Ignored
The PSB Manthan was held during the time when Indian exporters are in crisis due to US tariffs, but there was no discussion on the issue. Instead, there was discussion on how Indian enterprises overseas could be supported. Does that ring any bell? Adanis, Ambanis, Tatas!
As per RBI’s latest data, as on July 2025, non-food loans were down from 13.6% growth a year ago to 9.9%. The decline in credit growth to agriculture and allied activities is down by 7.3% and 18.1%. MSMEs have shown small growth. Medium industries grew 2.5% more than last year and micro and small industries 7.7% more than last year.
Current Account and Savings Bank Account growth is going down.
Call for Reducing Govt Stake
This will lead to private players getting into the banks as shareholder directors. They will not care for social banking. Shift to class banking is already taking place.
Autonomy to the Boards
The PSB boards have representatives of the Finance Ministry and RBI. For 11 years the banks do not have board of directors from workmen and non-workmen, which is mandatory. So each board has a shortage of two board members who are watchdogs.
As on March 2025, 42% of the posts of Board of Directors are vacant as per report. As per the FSIB website, the posts of many Executive Directors and even Managing Directors are vacant. This does not require a Manthan to fill up.
Regulations to be Left to RBI
RBI is no more independent. RBI is squarely responsible for shifting small borrowers to Non-Banking Financial Companies and Micro Finance Institutions. RBI has forced state governments to stop regulating NBFCs and MFIs though money lending is a state subject. RBI has not implemented its own decision of keeping maximum loan limit to one corporate as Rs. 10,000 crores. RBI is also responsible for keeping its eyes closed when the Govt is not appointing workmen and non-workmen directors mandated by law. RBI has refused to intervene when a private bank increased the minimum balance for SB Account to Rs. 50,000.
Efficiency of Private Banks
Net profit of private banks is going down. The profit fell by 0.6% this year compared to 26.7% growth last year. The PSBs are having double-digit profit growth for six years continuously. On average, private banks have 400 customers per employee whereas public banks have 2,000 customers per employee. 97% of the Jan Dhan Accounts are opened by PSBs. Most of the PM Svanidhi loans are given by PSBs. Let’s not compare apples with oranges.
Customer Experience, Technology and Workforce Readiness
Without the stakeholders like officers’ associations, workmen unions, representatives of customers/civil society dealing with finance, what is the meaning of this discussion? The poor technology is causing difficulties for the employees. Without the stakeholders these discussions are meaningless.
Conclusion
The increase in Non-Performing Assets, small borrowers at the mercy of modern-day money lenders, lack of employment which could be decreased by bank credit to farmers and MSMEs, inadequate staff in public banks, the inadequate interest rates for household deposits, and alarming frauds by Fin-Techs are issues the Government, RBI and banks should look at.
Otherwise, what happened in Sri Lanka, Bangladesh and Nepal may happen in India. It’s time to wake up.
Thomas Franco is the former General Secretary of the All India Bank Officers’ Confederation and a Steering Committee Member at the Global Labour University.
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