Revamping of Public Sector Banks

Revamping of Public Sector Banks

Revamping of Public Sector Banks

Revamping of Public Sector Banks

The project Indradhanush started in 2015 was aimed to bring major structural reforms in public sector banks in order to enable them to compete with the private banks. The goal was to boost economic growth by ending the political interference in the public sector bank and improve the credit deployment to the targeted sector or most commonly called as priority sector.

But the reform that was aimed to be made in the public sector banks is only half achieved and more still needs to be done. This is the apt time to bring the fundamental structural reforms in the public sector banks in the form of the streamlining of the operations in order to improve the efficiency and accountability.

Revamping of the structure

RBI data shows that credit deployment in public sector banks has been stagnant in the last two or three years whereas their private counterpart has accomplished a double digit growth. The problem lies in the structuring of the public sector banks.

In Private Banks the workload is distributed across the vertical structure whereas in public sector bank the structure is primarily based on the Branch where all the loads are put on the shoulder of the Branch Manager. In the private banks accountability is more distributed across the verticals whereas in Public sector banks accountability is attributed to the middle level management only. However most of the frauds and big ticket NPA default were approved at the top level management.

For e.g, Rana Kapoor of Yes Bank is being questioned and put behind the bars whereas none of the top executive of public sector banks has been investigated from where the big corporate loan gets approval.

Unless a restructuring of the fundamental structure of the PSBs is not done, the dismal situation of the PSB will continue. The middle level management must be given a sense of confidence of no accountability for their prudent credit decision.

Minimal Governments dictate

In the year 1969, the erstwhile government led by Smt Indira Gandhi nationalised the then private banks. The sole objective was to fulfil their political agenda of using the network of the banking sector to reach common mass. Since then to till date, the Public sector banks are being used by all government to flourish their political objective of appeasing mass. The same is not true with the Private Sector Banks.

Public sector banks does the mass banking in contrast to the Private Banks who does the class banking.

With no exception of any government, Public sector bank were always been the focal point when it comes to implement the governments schemes be it IRDP, MNREGS, NULM, JAN DHAN, DEMONETISATION, PMJJBY, APY, SBY and many more.

The NPAs in the public sector banks owed their rise to faulty loan schemes and ineffective recovery laws etc. These two along with the Loan waiver schemes announced time to time by various governments removed the fear from the mind of the public in general for non payment of the Banks loan.

Though the Project Indradhanush aimed to reduce the political interference in the Banking Sector but it does not happened so far. Rather the same has increased manifold. For e.g., 20 Lac crore package announced by the Government in the wake of Covid-19 crisis keep the PSBs at the centre of the package.

Nourishing the in house Talent

There is no dearth of the talent in the Public sector banks and it will be futile to think that pooling talent from the Private Banks can be the solution of all the ailments of the PSBs. The PSBs recruitment is very scientific and tests the mettle of the candidate thoroughly. The only requirement left is to nourish and nurture the available talent.

Presently the HR policy  in the PSBs is very unfriendly to employee. The HR policies are made in such a way that only those employees who dance to the tune of the top executive receives the favourable share and those who dare to refuse the dictum of the higher authority are sidelined.

Transparency in the HR policy which constitute the promotions, annual performance report, transfers etc will not only motivate the employees but also improve their decision making capacity which in totality will favour the PSBs growth.


The PSBs are grappling with very tough situation. Rising NPAs, Increasing Yearly loss and eroding capital base are some serious problems PSBs has to deal with. Structural changes few of them suggested above can help the PSBs to solve their problems. Instead of Loan restructuring, restructuring of PSBs is required.

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