These are the statements which give strength to the privatization in the country. State Bank of India Chairman Rajnish Kumar, as reported by BS said that privatization of some of the public sector banks will not do any harm to the banking sector or the economy, and the emphasis should be on the way any institution is governed, instead of who governs it. Further he said that
“We have a scenario where we have State bank and at least six large public sector banks post-merger to take care of any social agenda of the government, and rest of the banks can be in the private sector.”
“My view has always been that ownership should not matter. Whether the government holds 55 per cent or 40 per cent equity, the emphasis should be on the way any institution is governed, which is more material factor,” said Kumar, adding: “We have badly-governed private sectors and also well-governed public sectors.”
Table of Contents
Government Strategic Sector Policy
It is to be noted that the government has recently proposed a new policy to have not more than four public sector undertakings (PSUs) in each ‘strategic sector’. Noting that private banks should create a niche for themselves in order to be competitive, Kumar said: “We have a scenario where we have State bank and at least six large public sector banks post-merger to take care of any social agenda of the government, and rest of the banks can be in the private sector.”
“It does not matter who owns it, what matters is how the entity is governed,” he added.
Also Read – India Plans to Have Only Five Public Sector Banks
Benefits of digitization
The SBI Chairman also added that “if we do a transaction at a branch it costs us close to ₹60. While ATM transaction costs ₹9, mobile or internet banking transaction costs less than ₹1, and kiosk banking using business correspondents’ costs nearly ₹13 per transaction.”
“Even if I take the combination of kiosk banking and mobile plus internet banking, the cost of transaction to the bank will come close to ₹13 per transaction when compared to nearly ₹60 per transaction in branch,” he added
Earlier, credit rating modelling were based on various parameters, but with the underwriting moving to machine-based learning models, banks are able to predict defaults much better, he pointed out.
“We have pre-approved personal loan products delivered through our Yono app. The delinquency ratio through this mode is less than 0.3 per cent and we have already built a loan book of ₹15,000 crore,” said Kumar to highlight the power of predictive analysis.
Earlier, while delivering the memorial lecture, ‘Digital Banking: Has Covid hastened the arrival of this new normal?’, Kumar said only 7 out of 100 transactions today are happening at branches, and close to 50 per cent of transactions happen at ATMs, while the share of digital / mobile banking was less than 30 per cent.
“In three years time and because social distancing is becoming the norm, it has reversed. While the share of ATMs has come down to 29 out of every 100 transactions, the share of internet and mobile banking has walloped to 55 out of 100 transactions,” said Kumar, adding that, “this shift would continue and digital and mobile banking is bound to go up.”
