public sector banks in india
public sector banks are planning to tap the markets to raise more than rs ...
1. it is expected to improve the efficiency and service delivery of public sector banks .
public sector banks are inefficient, poorly governed and beset by largescale corruption, says debashis basu .
for demand and fixed deposits majority of the salaried employees have given equal weightage to public sector banks and private banks, while businessmen are more inclined towards public banks for all types of deposits .
below we are sharing the name of public sector banks with the anchor bank (with which other banks will get merged) .
1 lakh, public sector banks could lose out on customers who might open savings accounts with the post office .
in a study conducted by industry body assocham titled' growth and emergence of public and private sector banks in india: customer' s and investor' s perceptions', fourty per cent of the employees said they prefer public sector banks for purposes of investment in bonds and securities as compared to 30 per cent who prefer the private banks .
the insurance services provided by the public sector banks are preferred by 60 per cent of the salaried employees, while only 20 per cent prefer private banks .
the banks board bureau — headed by former comptroller and auditor general of india (cag) vinod rai — has been tasked with the responsibility of selecting the chief executives for public sector banks .
the united forum of bank unions has decided to observe july 19, the 48th anniversary of nationalisation of major banks, as' save public sector banks' day .
new delhi: the government on friday said there is no proposal for consolidation of public sector banks (psbs) at present .
however, the ratio shows a declining trend for parking money in mutual funds where only 20 per cent of the salaried employees prefer public sector banks, whereas 50 per cent preferred the private sector .
payment banks could also start offering competitive deposit rates of as high as 6 - 7% to lure customers, compared with the average 4% savings deposit rates of traditional public sector banks, according to ambit capital pvt. ltd in a note dated 20 august. this could weigh on the deposit franchise of public sector banks in the long run .
this preference is mainly due to a general perception of public sector banks being more reliable, secure and also trustworthy, mr dhoot said .
private sector banks are aware of the high risks in such loans and have mostly steered clear of them. no less than 90% of all educational loans have been given by public sector banks. in some countries, the risk is transferred to the government. in india, psbs have been loaded with the risk .
public sector banks are made to bear the cross for the sins of the private corporate defaulters, ch venkatachalam, general secretary, all india bank employees association, said .
india has also witnessed several private - sector failures, notably of companies in public - private partnerships in infrastructure. crony capitalism has become a problem in many areas where political discretion flourishes. however, both cronyism and public - private partnerships could be called examples of government failure rather than private - sector failure. on balance, india’s private sector has done a world - class job of transforming india .
moreover, mid and small public sector banks could also lose out from business correspondents (bcs). payment banks are permitted to collect deposits through branches or bcs. fino paytech ltd is one of the largest bcs to get a payment bank licence. with an established rural network, it will create strong competition for public sector banks in rural areas .
in the 1970s, the government used the psbs to mainly fund its various socially oriented loan schemes and public - sector projects, which often left a big hole in the banks' books .
, which is aimed to have strong banks rather than having numerically large number of banks .
but there could be an impact on small and medium public sector banks as incremental deposit growth and market share will see some impact from payment banks, especially in the rural and semi - urban areas. remember, public sector banks are also seeing their current and savings account (casa) deposit share slowing and have a huge pile of bad debts, which is affecting their profitability and ability to grow .
there could also be pressure on public sector banks’ deposit franchise from india post, which has received payment bank approval. india post’s reach, with 139, 000 post offices, significantly exceeds the number of bank branches at around 44, 700 in rural areas. since payment banks are allowed to take deposits up to
the government is working on a consolidation plan for various public sector banks in order to create 3 - 4 global - sized banks and reduce the number of state - owned lenders to about 12 from the existing 21, an official told pti .
what will be the impact on universal banks? the impact on private sector banks will be minimal because they have already made strong investments in technology. also some of the private sector banks like kotak mahindra bank ltd, yes bank ltd and icici bank ltd have tied up with some of the companies that have got approval for setting up payment banks and hence will not be affected much. large public sector banks have also tied up with or will very probably tie up with entities that have received payment bank approval. that is why rbi governor raghuram rajan, in an interaction with state bank of india chairperson arundhati bhattacharya on thursday, made light of the threat to big banks from payment banks, and said instead they could act like feeder banks and make the larger banks more competitive .
is intended to adequately bolster the state - owned banks’ capital base. in addition, previously banking sector has seen banks such as global trust bank and new bank of india merged with oriental bank of commerce and punjab national bank .
the study said most of the businessmen prefer indian overseas bank, corporation bank, pnb, sbi and syndicate bank in the public sector, while in the private banks, they prefer hdfc, citibank, icici and kotak mahindra .
so, public sector banks provide an especially important means for the finance minister to finance schemes that can fetch votes and possibly improve economic outcomes. this is equally true of public sector insurance companies, and oil companies (which for years subsidised diesel and petrol). these will, therefore, not be privatised .
the comptroller and auditor general of india (cag) has expressed doubts over the public sector banks' ability to raise rs 1, 10, 000 crore from markets by 2018 / 19 as part of their recapitalisation exercise .
to overcome the challenges and threats posed at present and in fore future, and give a new direction to banking reforms, government is considering merging the existing public sector banks. so, the government’s step to amalgamate
the department of financial services (dfs) is now in the process of collating information on candidates who could be considered for elevation to the post of managing director from the post of executive director in public sector banks during 2017 - 18 .
table 6. literacy growth in india (%) source: government of india, census of india 2011, http: / / urltoken .
some americans have asked me whether this might be followed up by the privatisation of public sector banks (psbs). these too are big in financial size and employment, and some are in almost as bad shape as air india. if modi can sell air india, why not the psbs? it won’t happen .
public anger over corruption and failed government services has risen, so the public mood in india today is far from triumphant. although india’s position in the world has been transformed beyond recognition in the past 25 years, much reform is still needed, above all reforms in governance, institutions, and the delivery of government services .
the banks board bureau (bbb) is in the process of putting together
far more attractive
compensation package to enable more professionals enter the public sector bank space, its chairman, vinod rai, has said .
8 square building, 6th floor, plot no. 8, sector 125, noida, india - 201313
thus, now it becomes easier to understand that all those banks which were taken over through banking companies (acquisition and transfer of undertaking) bill are called nationalised banks. goi issued an ordinance (banking companies (acquisition and transfer of undertakings) ordiance, 1969, and nationalised 14 largest commercial banks in india from the midnight of 19th july, 1969. these banks at that time contained 85% of bank deposits in india. similarly in 1980, goi again nationalised 6 more banks. thus, in total 20 banks were nationalised. out of these new bank of india was merged with pnb in 1993. thus, now strictly speaking 19 nationalized banks are in existence. rbi on its website also lists under
nationalised banks
category only these 19 banks. (for sbi see below )
every season an old idea finds new life. the idea in currency currently is merger of public sector banks (psbs). branded as consolidation, the agenda is to reduce the number of government - owned banks by merging smaller banks into larger anchor banks—bank of baroda, canara bank, punjab national bank and bank of india. the road map for this consolidation, we are informed, is being worked out by the niti aayog .
must at least be comparable to what their peers in private sector get, says ...
the government had in february approved the merger of five associate banks with state bank of india (sbi). photo: mint
the 21 public sector banks would get consolidated to 10 - 12 in the medium term, the official said. as part of a three - tier structure, the official said, there would be at least 3 - 4 banks of the size of state bank of india (sbi), the country' s largest lender .
one of the possibilities is that large public sector banks (psbs) like punjab national bank, bank of baroda, canara bank and bank of india could try looking for potential candidates for acquisition, another official said, who did not wish to be identified .
according to former rbi governor c. rangarajan, the system will have some large banks, some small banks, some local banks and so forth .
what is needed in the system is variety ,
rangarajan said .
education loans provide another example. the government is keen on expanding such loans to students, who are increasingly entering high - cost private colleges. so, public sector banks have been instructed to step up education loans .
in fact, commercial banks did not focus on growing their retail portfolios till the late 1990s .
india’s public spending on health, which elsewhere commonly provides health care access to the poor, has always been among the lowest in the world. india has world - class hospitals for the elite, but the masses are at the mercy of quacks and dubious practitioners of traditional indigenous medicine. table 9 shows how far india lags behind other regions in public health spending .
after the mega merger of state bank of india (sbi) with five of its associate banks, the government has taken another step to consolidate public sector banks. while it has left the decision of mergers and acquisitions to individual bank boards, it also said the final decision will be based on commercial considerations. capital constraints, asset quality and the creation of large banks are likely to be the yardsticks .
the indian banking sector is close to a breaking point. one generation after the sector was liberalised, assets and deposits remain dominated by government - owned banks, whose risk management and corporate governance frameworks have collectively proven unsustainably weak .
new delhi, may 7 (uni) even as private sector banks allure customers with smoother services, 60 per cent salaried employees in the country still prefer state - run banks for insurance purposes, as they are more reliable, secure and trustworthy .
deepak parekh is the chairman of the housing and development finance corporation of india. this excerpt, used with permission from penguin india, is from the chapter institution - building in the financial sector: the hdfc experience, which parekh wrote in the book india transformed, edited by rakesh mohan .
in fact, competition from here on is only going to get tougher. rbi is going to announce small finance banks soon and is currently evaluating around 70 applications. that means, in the longer term, some of the smaller public sector banks may remain under pressure, particularly those that are strapped for cash and cannot participate fully once a full - fledged recovery happens .
the chart below highlights the geographical presence of state - owned banks. the western and southern regions have the highest number of lenders; banks in the west are bigger in size. note also that banks such as punjab national bank, bank of baroda, union bank of india, and canara bank have pan - india presence, along with a strong regional visibility. post merger, sbi’s presence across india has further strengthened .
the banking system in india comprises commercial and co - operative banks with commercial banks accounting for the bulk of the banking assets. psbs account for over 70 per cent of the deposits received in and advances made by the scbs. the capital requirement of psbs is driven by credit growth in the economy and prudential regulatory requirements. the regulatory framework for banks is globally developed by the basel committee on banking supervision, which is adopted by the reserve bank of india for the indian banks .
public - sector banks (psbs) dominate the indian financial sector. they hold the bulk of people' s savings. they are the main source of loans to small businesses and large projects alike. they are vehicles for his ambitious jan dhan yojana. they are also inefficient, poorly governed and beset by largescale corruption .
as the government thinks through its options, it will need to answer a number of questions about the structure of the banking industry – e. g. role of the government in running banks, ability of public sector banks to deliver credit & service for greater public good, government participation in banking giving a push to the financial inclusion. our paper explores the extent to which the status quo could be maintained, should the government choose the path of minimal disruption .
two years ago, when finance minister arun jaitley was visiting the us, he asked what journalists like me meant when we asked for big - bang reforms. for starters, i said, privatise the ten worst public sector banks. he laughed and said this was difficult because the banks played such an important role in the implementation of government policies .
the 12th five - year plan (2012 - 17) envisaged $ 1 trillion of investment in infrastructure, of which half was to come from the private sector. that goal now sounds like a pathetic joke. the gargantuan losses of many infrastructure companies now threaten to sink the banks that lent to them. about 10 - 20 percent of the loans of public - sector banks have been restructured or are under some form of stress .
given this low rate of public spending, the quality of public health is poor, and health indicators in india are typically worse than in neighboring countries of south asia. india has some of the worst nutritional indicators in the world. anemia affects over 80 percent of the population in several states, including many in the richest one - third. child malnutrition, measured by low weight for age, affects 46. 7 percent of all indian children, worse than in most african countries .
for instance, he said, infrastructure was a top priority, but private banks were not very keen on lending to that sector, and so psbs had proved invaluable in providing finance for infrastructure .
4. customers of smaller banks will get access to wider use of financial instruments like mutual funds and insurance products, as offered by big banks .
krung thai bank public co. ltd. $ (does not maintain india specific website or link. link for information on branch details: urltoken
public sector banks have always been used by successive governments to implement schemes for which there is insufficient money in the budget. we are now in an era of fiscal stringency, with the fiscal responsibility and budget management act obliging the government to keep cutting its fiscal deficit. in these circumstances, there is less fiscal space than ever for launching new government schemes .
post offices have long been trusted for long - term deposits and by offering casa deposits, they could potentially cannibalize public sector banks’ casa share in rural markets, which makes up around 90 - 95% of the casa deposits, according to a nomura global markets research note dated 19 august .
the cag audit report on recapitalisation of public sector banks (psb), tabled in the parliament today, said that the banks were able to raise only rs 7, 726 crore during january 2015 and march 2017. it has led to the doubt on the possibility of raising the balance, amounting to over rs 100, 000 crore, from the market by 2019 .
state - owned banks are in a league of their own in terms of dominating their sector: they form a network of 21 listed but government - controlled entities that account for 70% of india’s banking system by assets. many of their loans are unlikely to be repaid, a state of affairs that private lenders usually manage to avoid. the latter are growing at a rapid clip: they are responsible for nearly all the growth in the financial system. in the early part of 2016, the market capitalisation of all 21 listed public - sector banks was on a par with that of a single private rival, hdfc bank, set up back in 1995 .
status of state bank of india: at the time of independence, this bank was known as imperial bank of india and was a joint stock company. in 1955, by provisions of the state bank of india act 1955, reserve bank of india acquired a controlling interest in the imperial bank of india. on 30th april 1955, the imperial bank of india became state bank of india. rbi continued to have controlling interest in sbi till recently when government of india decided to acquire rbi' s stake in sbi so as to remove any conflict of interest (as rbi is the
in the last consolidation drive, five associate banks and bharatiya mahila bank (bmb) became part of sbi on 1 april, 2017, catapulting the country' s largest lender to among the top 50 banks in the world .
reserve bank of india, which till recently had a significant role in deciding the chief executives, has now taken a backseat with the emergence of the banks board bureau .
public - sector corporations remain large, wasteful, and unreformed. government banks still control 70 percent of bank lending, have the worst record of bad loans and financial losses, and yet are such convenient cash cows for politicians that no party wants to privatize them .
the situation is quite bad and there are no certain estimates on the extent of capitalisation required to bring the public sector banks back to the path of growth. it is our view that a comprehensive vision is critical for the sector – for the sustained economic growth it facilitates and for the populace to have access to quality financial services. the questions which need to be addressed are not easy to answer and will be best approached through a healthy public dialogue .
small businesses complain of onerous conditions imposed by banks before loans are sanctioned. often banks arm - twist borrowers to buy some expensive insurance as an unwritten precondition .
to conclude, there remain several challenges in the indian financial sector such as reducing the build - up of non - performing assets, particularly in public - sector banks, deepening the debt markets and finding optimal solutions and institutional mechanisms to sustainably fund long - term infrastructure projects. the indian financial system has never been short of solutions, though often the obstruction has come by way of a lack of consensus and the will to bite the bullet .
bankable: in an era of fiscal stringency, govt banks are an important means to finance schemes that can fetch votes .
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despite the changes witnessed over the years, there still exist a number of challenges which need to be addressed, one such challenge being the npa. in the quarter ending december 2015, nearly 11 public sector banks reported loss, which even includes big names like, bank of baroda, idbi bank, bank of india and indian overseas bank. the net non - performing assets (npa), in the banking sector, have crossed rs 4. 3 lakh crore during the quarter - ended december 31, 2015 .
in may, the all india bank employees association (aibea) assessed wilful defaults worth rs 70, 300 crore in 400 psb loan accounts .
9. s. mahendra dev, “economic reforms, poverty and inequality in india, ” symbiosis school of economics, pune, india, february 26, 2016 .
a similar tale comes from public sector insurance companies, which have been obliged to launch schemes at unviable low premiums. the government has created a pradhan mantri jeevan jyoti bima yojana — a term life insurance policy .
the explosively growing food delivery business in india is going upmarket, getting specialised and dishing out ...
by contrast, government failure has been widespread. all tiger economies witnessed a big improvement in the provision of public goods, which was needed to encourage private dynamism and sustain growth. but in india, the provision of all government services remains poor, and so india has slipped in social indicators compared with its slower - growing neighbors in south asia. even remote indian villages have an adequate supply of shops providing cigarettes and tea. but they have no adequate supply of education, health, public safety, or judicial redress .
india is far from being the only country where technology armed with financial apps is challenging traditional banks. in china, mobile apps have mushroomed and have started threatening the backward and inefficient traditional banks, so much so that many customers have switched directly from cash transactions to banking through mobile apps .
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in 2015 india’s annual status of education report said that only 48. 1 percent of children in their fifth school year could read a text appropriate for their second school year. arithmetic remains a challenge. only 44. 1 percent of class 8 students in rural india managed to solve a division problem in 2014, compared with 46 percent in 2013 .
throughout this period, private - sector companies also relied on government - owned banks and financial institutions for loans. since the lenders insisted that promoters bring in substantial amounts of cash, borrowers would inflate the cost project and siphon off the money .
typically, mergers of banks—in india as also in europe and elsewhere—are guided by concern for the interests of depositors. in their book a century of banking consolidation in europe, scholars manfred pohl, teresa tortella and herman van der wee, observe “scale as a power factor in bank mergers is widely disputed, the majority of scholars seem to be skeptical. ” and the history of banking in england under montagu norman is relevant .
teamlease services, a recruitment and consultancy concern, has been an observer - participant in india’s labour ...
having established a reputation as an incrementalist who shuns radical change, prime minister narendra modi has suddenly changed expectations by opting to privatise air india. this is such a huge public sector giant with so many subsidiaries and lakhs of employees that nobody ever dreamed it could come first in the list of modi privatisations. yet that is the case .
2. a few large inter - linked banks expose the broader economy to greater financial risks .
though state - run banks’ financials are crippled, their franchise and customer trust are not broken .
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table 4. fewer households report any hunger in preceding 12 months source: angus deaton and jean drèze, “food and nutrition in india: facts and interpretations, ” economic and political weekly (india), february 14, 2009 .
12. arvind panagariya, “the myth of child nutrition in india, ” columbia university, new york, 2012 .
after 30 years of unaccountable lending, banks started complaining that they need tougher laws to enforce collaterals. in response, the government created the securitisation and reconstruction of financial assets and enforcement of security interest act (sarfaesi) of 2002, designed to help banks in the recovery of bad loans .
table 9. public health spending as a percentage of gdp source: jean drèze and amartya sen, an uncertain glory: india and its contradictions (new delhi: penguin, 2013) .
the green revolution made india first self - sufficient and then a surplus producer of food. india suffered two consecutive droughts in 2014 and 2015, yet agricultural production actually rose slightly; india became the world’s largest rice exporter in 2015, exporting 10. 23 million tons. india has also become a substantial exporter of wheat and maize in recent years. that is a measure of its agricultural transformation. paddock and paddock never imaged that india, which swallowed almost the entire food aid of the world in the mid - 1960s, would become a donor of food aid to north korea in 2010 .
until 1991 many superpowers (notably the united states) equated india with pakistan in foreign affairs, even though pakistan had barely one - eighth of india’s population. india’s slow - growing, inward - looking socialism made it unimportant in global terms, save as an aid recipient. pakistan’s military ties with the united states made that country seem a more important global player. but today, the united states views india as a potential superpower. president george w. bush backed india’s entry into the nuclear club. president barack obama has backed india for a seat on the un security council. the united states sees india as potentially the only country in asia that can check a rising chinese juggernaut in the 21st century. and newsweek has called india a “potential superpower. ” 7
in his lecture, rai said the need for greater probity, transparency and accountability in governance has gained added significance going by india' s experience in the last two decades since the opening of the economy from 1990s .
last month, finance minister arun jaitley said the government is' actively working' towards consolidation of public sector banks but declined to provide details, saying this was a price - sensitive information. enthused by the success of sbi merger, the finance ministry is considering clearing another such proposal by this fiscal if bad loan situation comes under control by then .
sbi has controlling interest in these subsidiaries ranging from 75% to 100% . as on 30th june 2011, the five associate banks had a combined network of 4748 branches in india which are on core banking and 4713 atms networked with sbi atms providing value added services to clientele. the combined net profit of these banks was rs735. 79 crores as on 30th june, 2011 .
indira gandhi nationalised pvt to psb not for welfare of people... only to fill their exchequer... india is still poor after nationalization of banks... .
these have crossed all acceptable proportions and have reached a dangerous level threatening the very sustainability of the banks .
42. “absenteeism, repetition and silent exclusion in india, ” create india policy brief no. 3, consortium for research on educational access, transitions and equity, brighton, uk, january 2011 .
2016 marks a quarter of a century since india’s landmark reforms of 1991 were initiated, ushering in monumental changes to the economy .
table 5. male and female work participation rates in india source: s. mahendra dev, suresh tendulkar lecture, 2016 .
33. pradeep thakur, “vacancies in judiciary hit judge - people ratio, ” times of india, april 17, 2016 .
“banks that will not be able to deliver on the agreed upon turnaround plan for a period of two years will be identified as banks eligible for alternative recourse, ” minister of state for finance santosh kumar gangwar said .
the world bank’s 2016 doing business report puts india at 130th of 189 countries in the ease of doing business in the country. that change is an improvement from its earlier 142nd position, but it still leaves india in the bottom half of countries. india ranks especially low in the ease of getting construction permits (183rd), enforcing contracts (178th), paying taxes (157th), and starting a business (155th). 32
india has been grappling with the issue of twin balance sheets—now shrink wrapped into a convenient acronym, tbs! the twin balance sheets issue is in essence about the burden of bad loans on the books of banks and the pile up of debt on corporate balance sheets. this has precluded the ability of banks to lend, and of corporates to borrow and invest .
chief executive officer krung thai bank public co. limited 62, 6th floor, maker chambers vi, nariman point, mumbai - 400 021
22. ashok gulati, surbhi jain, and nidhi satija, “rising farm wages in india: the ‘pull’ and ‘push’ factors, ” commission for agricultural costs and prices, government of india, new delhi, april 2013 .
the government in february had approved the merger of these five associate banks with sbi. later in march, the cabinet approved merger of bmb as well. sbi first merged state bank of saurashtra with itself in 2008. two years later, state bank of indore was merged with it .
economic reforms that began 25 years ago have transformed india. what used to be a poor, slow - growing country now has the third - largest gross domestic product (gdp) in the world with regard to purchasing power parity and is projected to be the fastest - growing major economy in the world in 2016 (with 7. 6 percent growth in gdp). once an object of pity, india has become an object of envy. it has been called a potential superpower and the only credible check on chinese power in asia in the 21st century. hence, the united states has backed india for a permanent seat in the united nations and has persuaded the nuclear suppliers group to exempt india from the usual nuclear nonproliferation rules .
ch venkatachalam, general secretary, all india bank employees association. (file photo )
7. fareed zakaria, “india rising, ” newsweek, march 5, 2006 .
the computer software and business services sector has been outstanding and has become india’s largest and most famous export sector, fetching $ 110 billion in 2015 - 16 against india’s entire merchandise exports of $ 261 billion. the auto industry, highly protected for decades, has opened up and become world - class: india is now a global hub for the production and design of small cars. the pharmaceutical industry feared being wiped out by the acceptance of drug patents after the creation of the world trade organization in 1995. but in fact it flourished in the new climate and now supplies 20 percent of the u. s. consumption of generic drugs. most indian pharmaceutical companies export more than they sell at home, and dozens have become multinationals through foreign acquisitions and organic expansion .
in the two decades since 1991, india’s literacy rate has shot up by a record 21. 8 percentage points, to 74 percent (see table 6). in the earlier two decades, it rose by less: 17. 8 percentage points. india’s literacy rate remains poor by global standards, but it has improved much faster in the era of reform than in the earlier era of socialism .
10. arvind panagariya and vishal more, “poverty by social, religious and economic groups in india and its largest states, 1993 - 94 to 2011 - 12, ” working paper no. 2013 - 02, school of international and public affairs, columbia university, new york, 2013 .
besides the threat to deposits, competition for state - owned banks will intensify as payment banks, which are backed by digital platforms, adequate capital, zero legacy issues, and low - cost innovative and convenient services, will compete heavily for liabilities in rural and semi - urban areas. there could be a loss of market share in payment transactions and government transfers too, said clsa in a report dated 20 august .
yes, fewer banks translates to lesser number of banks with non performing assets (npas). that is optics. the moot point is how does consolidation address the issue of npas? it is estimated that the government will need to make available over '2. 25 lakh crore to recapitalise banks. this will impact the fiscal balance of the government’s balance sheet .
the banks where vacancies are expected to arise include oriental bank of commerce, vijaya bank, syndicate bank and allahabad bank .
8. the chairman arunachal pradesh rural bank e sector, shiv mandir road naharlagun - 791 110 arunachal pradesh urltoken phone no. 0360 - 2246091
13. the chairman dena gujarat gramin bank balwantray mehta bhavan ch road, sector 17 gandhinagar - 382 017 urltoken phone no. 079 - 23247325
lousy government services lead to lousy social indicators. the quality of the delivery of government services remains poor. the big improvements in private - sector competitiveness are not even remotely replicated in government service competitiveness. india’s social indicators remain dismal. it has slipped even compared with the other five countries of south asia (bangladesh, bhutan, nepal, pakistan, and sri lanka — see table 7 .) yet india has the fastest economic growth in south asia. back in 1990, only one of its neighbors, sri lanka, had better social indicators, but now india looks to be second worst, ahead of only trouble - torn pakistan .
india has become a global hub for computer software development. microsoft, oracle, sap, ibm, accenture, and other top international companies use india as a base. ibm has more employees in india than in the united states, because indian skills are often as good as — and much cheaper than — those in the west. that fact has led to many complaints that ibm is shifting jobs to india. many indian engineers and scientists who used to work for multinationals abroad have returned to work in the companies’ indian subsidiaries and branches. the former brain drain has turned into brain circulation. 16 the guardian carried an analysis titled “india is an emerging geek power. ”
38. charlotte alfred, “india’s new parliament has the most members facing criminal charges in a decade, ” huffington post, may 23, 2014 .
besides the threat to deposits, competition for state - owned banks will intensify as payment banks, which are backed by digital platforms, adequate capital, zero legacy issues and low - cost innovative and convenient services, will compete heavily for liabilities in rural and semi - urban areas. photo: hemant mishra / mint
the chandigarh state co - operative bank ltd. s. c. o. 1088 - 89 sector - 22 - b chandigarh - 160 022 .
the haryana state co - opertive apex bank ltd. bank square sector 17 - b p. b. no. 7 chandigarh - 160 017 .
in india, delays in clearances and land acquisition make early stages of infrastructure very risky. yet such projects have historically had a high debt - to - equity ratio, so any delay is financially fatal. the modi administration has given the government a major role in financing fresh equity in infrastructure, with the private sector mainly executing government contracts. clearances and land acquisition have picked up. bank loans to state electricity boards have largely been replaced by state bonds, relieving bank stress .
the chairman united bank of india 16, old court house street kolkata - 700 001 .
once a poor economic laggard, india now has the third - largest gdp ($ 7. 98 trillion) in the world in purchasing power parity terms after china and the united states (table 1) .
no one in india had so far attempted to finance individuals for their housing needs. access to long - term finance was difficult and no foreclosure norms existed. at that time, most indians were extremely debt averse…hdfc remained the only housing finance player in india till the late 1980s…hdfc also promoted four other housing finance companies. in effect, hdfc created competition for itself !
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india’s annual gdp growth rose from 3. 5 percent in 1950 - 80 and 5. 5 percent in 1980 - 92 to an average of 8 percent since 2003, with a peak exceeding 9 percent in the three years 2005 - 8 (see table 2). the international monetary fund estimates india’s gdp growth at 7. 3 percent in 2015 and 7. 5 percent in 2016, faster than china’s rates (6. 9 percent and 6. 5 percent, respectively). in a depressed global economy, the imf sees the united states and india as the two bright spots, as the two major economies holding up an otherwise slowing world .
the quality of government services remains abysmal, and social indicators have improved much too slowly. the provision of public goods — police, judiciary, general administration, basic health and education, and basic infrastructure — has seriously lagged improvements in economic performance. political appointees and government interference erode the independence and quality of institutions ranging from the courts and universities to health and cultural organizations. india’s economic reforms have been highly successful in moving the country from low - income to middle - income status, despite little improvement in its institutions and quality of public goods. to sustain rapid growth and to become a high - income country, india will need major reforms to deepen liberalization and build high - quality institutions .
18. ambika choudhary mahajan, “1. 5 million engineers pass out in india every year, fewer getting hired, ” dazeinfo, october 28, 2014 .
the chairman bank of india, head office express towers, nariman point mumbai - 400 021 .
the punjab state co - operative bank ltd. s. c. o. no. 175 - 187 sector - 34 - a chandigarh - 160 022 .
life expectancy in india is up from an average of 58. 6 years in 1986 - 91 to 68. 5 years. infant mortality is down from 87 deaths per 1, 000 births to 40. these are major improvements. yet they lag well behind achievements in other countries. 29
bharti airtel ltd, tech mahindra ltd, aditya birla nuvo ltd, cholamandalam investment and finance co. ltd and reliance industries ltd shares rallied on thursday morning as they were among the 11 entities which have received in - principle approval from the reserve bank of india (rbi) to start payment banks .
pay scales borrowed from the bureaucracy mean chief executives get paid around $ 50, 000, pushing the brightest sparks to the private sector. replacing them is hard: according to a recent report in asian age, a newspaper, as many as 42 psus are lacking bosses after a change in the method to appoint managers in june 2016 stalled any new hires .
india was in such poor shape before 1991 that it takes an effort to recall how bad things were. some of the biggest changes since then are described below .
in the bad old days, any major drought meant india was dependent on food aid. when two droughts occurred in a row, as in 1965 and 1966, india survived only because of record food aid from the united states. a 1967 best - selling book by william and paul paddock declared that simply not enough food aid existed to save all needy countries, and so hopeless countries like india should be left to starve, conserving food aid for countries that were capable of survival. 8
roughly one in six of every rupee spent goes to a psu. only in china’s avowedly communist economy does a greater share of spending go to state - owned firms. often run by executives who have risen through the government bureaucracy, they eke out profits mostly in industries where government fiat grants them lucrative monopolies, such as coal and oil. even in a buoyant economy, one in three made losses in the year ending in march 2016. one in five has racked up three years of straight losses including bsnl, a telecoms operator which offers 3g services in a market where 4g ones are the norm. another example is air india, a financial black hole that flies habitually - delayed aeroplanes .
the arunachal pradesh state co - operative apex bank ltd. p. o. & t. naharlagun
d
sector district - subansiri naharlagun - 791 110 .
the chairman central bank of india, central office chander mukhi, nariman point mumbai - 400 021 .
5. large banks would have a wider capital base enabling them to offer big ticket loans on their own without being part of a consortium .
mr modi has repeatedly talked about governance. the first step in governance of psbs is to fix responsibility on their top brass for loans that have turned bad. right now, accountability in the psbs is a black hole despite the fact that banks have stringent credit - appraisal process .
in the period post the nationalisation of banks and up until 1993, the indian banking system had regressed considerably. tongue in cheek, it was often said that bankers did not do banking; they merely carried out orders of the powers that be…reflecting back on the pre - liberalisation era, one realises that back then, banks did not fix any interest rates—they were all mandated. there were no prudential norms, no regulations on capital adequacy or rules for non - performing loans. even opening a bank branch would take months after seeking the approval of the rbi. clearly, the turning point was the opening up of the banking sector to private players in 1993 .
a survey conducted in january 2016 by the center for monitoring indian economy showed that projects worth rs 10. 7 trillion ($ 160 billion) were stuck for various reasons, up from rs 10. 5 trillion ($ 158 billion) in september 2015. 30 the heritage foundation’s economic freedom index places india at just 123rd out of 178 countries. of the foundation’s five categories — free, mostly free, moderately free, mostly unfree, and repressed — india falls into the “mostly unfree” category. the fraser institute’s index of economic freedom ranks india at 114th of 157 countries. india’s freedom score as calculated by the fraser institute has actually declined in recent years, from a peak of 6. 71 in 2005 to 6. 43 in 2013. 31
corruption has experienced a recent backlash. corruption in countries often gallops upward with gdp, and india in the past 25 years has been no exception. in one sex scandal, the governor of a state had to resign after the madam of a brothel circulated photos of him with three naked girls. why did she do so? because the governor had promised her a mining license, and when he failed to deliver, she exposed him in revenge. only in india is the supply of naked girls a potential qualification for getting a mining license. 39
besides the problem of npa, the other problem faced by the banking sector is of capital requirement to meet the new capital adequacy norms set up by basel –iii standards .
one of the key provisions of the act is for banks to be able to auction the assets of defaulting borrowers. but notice that even after getting a tougher law, banks have not been able to claw back much money from vijay mallya of kingfisher or the reddy brothers of deccan chronicle .
the dissonance in policy that is preached and practice is striking. the reserve bank of india, through its many committees and reports, has consistently evangelised the need for more players to drive inclusion and competition— and even issued over 20 new licences. the bigger question is: what is the purpose of mergers? it cannot be just about “do we need x number of banks”? the european central bank lists 5, 805 monetary financial institutions and 4, 937 credit institutions. check the number of banks in germany france and the uk .
therefore, contrary to all prudent norms, projects were more than fully funded by government banks, with most promoters having no skin in the game. naturally, many projects turned sick while the promoters enriched themselves. bankruptcy laws were weak. nothing could curb the corrupt nexus between psbs and their defaulting borrowers. when such poor lending weakened the banks, the government would step in and
recapitalise
them for the game to continue .
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chief executive officer american express banking corp. cyber city, tower “c”, dlf building no. 8 sector - 25, dlf city phase - ii, gurugram – 122 002
the gains reaped earlier may also get wiped out, if the government has to intervene financially to bail out individual companies or a sector at large ,
he said .
consider each of those three trends in further detail. the private sector has performed outstandingly in the past 25 years, taking advantage of new opportunities created by liberalization and globalization. indian companies more than held their own against foreign newcomers, and the vast majority of big indian companies have become multinationals, making acquisitions globally .
in 1992, hdfc’s market capitalisation was rs3. 15 billion and all the shares were held domestically. today, hdfc’s market capitalisation is rs2. 2 trillion and the foreign shareholding stands at 77% . taking the combined market capitalisation of the three listed entities within the hdfc group, it is in excess of rs5. 6 trillion ($ 85 billion). clearly, vast shareholder wealth has been created in the financial sector in the post - liberalisation era.
public sector banks ( psbs ) are banks where a majority stake ( i.e. more than 50 % ) is held by a government . the shares of these banks are listed on stock exchanges . there are a total of 21 psbs in india . 
public sector banks (psbs) are banks where a majority stake (i.e. more than 50 %) is held by a government. the shares of these banks are listed on stock exchanges. there are a total of 21 psbs in india.
public sector banks (psbs) are banks where a majority stake (i.e. more than 50 %) is held by a government. the shares of these banks are listed on stock exchanges. there are a total of 21 psbs in india.