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This article was first published 6 years ago  » Business » Why govt banks will not be privatised

Why govt banks will not be privatised

By Indivjal Dhasmana
March 28, 2018 10:59 IST
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'There is a law that prevents the government from diluting its equity in the PSBs below 50 per cent.'
'That law has to be amended and given the parliamentary arithmetic of the political parties, it is not as simple to do that.'

Photograph: Rupak De Chowdhuri/Reuters
Photograph: Rupak De Chowdhuri/Reuters

NITI Aayog Vice-Chairman Rajiv Kumar favours the setting up of a bank investment company that would hold government shares in public sector banks, an idea suggested by the P J Nayak Committee.

"Ideally, each of these banks should be restructured around a digital backbone," Rajiv Kumar, left, bottom, tells Indivjal Dhasmana.

Now, there is a chorus of demands for privatisation of public sector banks in the aftermath of the Punjab National Bank fraud. What advice will you give to the government on this issue?

This is not such a simple issue.

First, there is a law that prevents the government from diluting its equity in the PSBs below 50 per cent.

That law has to be amended and given the parliamentary arithmetic of the political parties, it is not as simple to do that.

It is easier said than done.

Former finance minister Yashwant Sinha considered it in the previous NDA (National Democratic Alliance) government.

I don't see this happening, given its practicality and due to the fact that all stakeholders of PSBs are not up for it.

I think the solution to improve the functioning of these banks has to be found within the framework that we have got.


So, what is your idea of a solution? Is it the recommendation by P J Nayak committee to set up the Bank Investment Company?

That is one part of the solution.

BIC will at least mean you have a body of domain experts who can supervise the PBSs on a day-to-day basis.

I am in support of BIC.

That will help make an arm's length distance between the government and the operations of banks, improving corporate governance.

Secondly, what has come out in the PNB fraud is that there is not a complete grasp of digital banking.

So, we should set up a group of well-known information technology experts who can do IT audit of banks.

Ideally, each of these banks should be restructured around a digital backbone.

At the moment, the digital framework is laid over the existing structure.

Now, there are new banks such as one from Singapore, which is opening all digital branches.

You need that kind of restructuring for PSBs to be in sync with current technologies. IT audit would not require much time.

IMAGE: 'Days of 'What America does today, the world does tomorrow' have gone,' says NITI Aayog Vice-Chairman Rajiv Kumar. Photograph: PTI Photo

Experts say we are reverting to protectionism ourselves by increasing customs duties in the Budget while posturing that we are anti-protectionists.

I don't think that is true. After all, import duties were hiked on only a few commodities at a disaggregated level.

We are very much abiding by free trade agreements that we have signed.

The WTO's mini-ministerial showed India's commitment to a rule-based world trading system.

The Budget measure is intended to give breathing space to those industries that have been facing an onslaught.

The breathing space was given to enable them to meet infrastructure, logistics, skill requirements so that they can face global competition and indigenous capacities are created.

You have to give some breathing space to industries such as electronics, but you don't do the same for the auto industry.

In the auto industry, local preferences being given in the past has enabled the players to export.

Similar success can be achieved in electronics as well. We still are the liberal and open economy.

What about US President Donald J Trump's reciprocal tax? Won't it lead to protectionism and a trade war?

I don't think so. Days of 'What America does today, the world does tomorrow' have gone.

Days when America had overwhelming dominance in the world, the markets and trade are no longer there.

As I see it, Europe, China and Japan will not follow suit of what Trump is doing.

It's not that we are entering into a protectionist world. This has been the old American habit. It settles issues bilaterally.

They want to correct the trade surplus in favour of China. China will have to relent a little bit.

What about India?

Our trade surplus with the US is hardly anything compared to what China has with that country.

I don't think we will negotiate bilaterally.

Though the US is a large market for us, what will we relent on?

I don't see India retaliating, buckling down or relenting.

We have taken a stand that we are for a multilateral trading order and not for such measures. I think we will stick to our stand.

But, this undermines WTO. Does it not?

The US has done it in the past. The liberal world order is there. This is a blip. I don't think this has a lasting impact on the world.

Critics take on the government for not creating enough jobs. However, recent job data in a survey by the Labour Bureau show a jump in jobs in the manufacturing sector. What is the exact job situation in the country?

I have never believed in the charges of less jobs.

I am a strong believer in the results that Ghosh and Ghosh have come out in their study by analysing EPFO data.

However, I want to add that even that data doesn't include figures from new employers such as Ola, Uber and Amazon.

These are not covered in any job data.

Therefore, NITI Aayog is trying to put together a unit that will collect payroll data from new employers.

Labour Bureau data that you people believed in the past when it showed a decline in jobs should be believed now as well as labour intensive and manufacturing sectors are showing a rise in jobs.

There is a lot of upsides left in labour-intensive sectors because of which you would see growth in these sectors in coming months.

NITI Aayog is also involved in designing the MSP for farmers. What kind of design will it be? Will it be the Bhavantaran Yojna on the lines of the Madhya Pradesh government's initiative or the Centre's existing model?

We had called a big meeting of all the states agriculture secretaries.

We are in the process of designing the packages as soon as possible.

There are three packages one of which is Bhavantaran, which has been tried.

Another is the market assurance scheme and then private participation along with a price stabilisation scheme.

All the three are being examined. We will present them as options to the states because agriculture is primarily the states' responsibility.

The Cabinet has cleared ModiCare. When do you think it will be rolled out across India?
Will it be introduced in a phased manner? What will be the premium and the Centre-state funding pattern?

Please don't call it ModiCare and make it appear like a copy-paste of ObamaCare. It is certainly not that.

The scheme is designed to cover over 400 million persons -- the scale is quite staggering.

Due to this, its premium levels will remain relatively lower at less than Rs 1,200 per family a year.

It includes hospitalisation and will substantially cover a large number of protocols and treatments.

Details of these are being worked out and will be rolled out by the proposed National Health Authority Agency.

Costs of the premium will be shared on the well-established existing model for centrally sponsored schemes.

This will be a historical shift. Henceforth, the poor will not have to suffer the trauma that presently comes with a medical emergency.

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Indivjal Dhasmana
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