License For New Banks

It is true that after the entry of private players in telecom sector health of BSNL and MTNL has moved from bad to worse, moved from loss profit to loss and moved from little performer to non performer. Similarly Indian Airlines and Air India were considered to be one of the best and use to earn profit before entry of private players like Kingfishers, Jet airlines, Spice Jet, Indigo etc. Now even after merger of state run Indian Airlines and Air India, government is unable to earn profit and willingly or unwillingly incurring loss in thousands of crores of rupees. There is no doubt that state run banks have moved from bad to worse after the entry of private banks in banking business. Quantum of bad assets has become unmanageable and posing insurmountable risk of sinking and has forced government to think for merger of weak banks into strong bank to conceal their evil deeds.

But the million dollar question is why private sector business entities performed and state run department failed to perform and compete with private players in all fields including airlines, telecom or banking and insurance. Not only this government has miserably failed to protect the efficiency, honesty,  interest and profitability of all departments and of almost all public sector undertakings working in the field of coal, steel, power manufacture, power distribution, mining, education, judiciary, police  and so on.

After all what are the reasons that private players get success in keeping customers happy and earning profit too. It is open secret that failure of all public sector undertakings and all departments in control of either state or central government is due to

1.     Political exploitation of all such government control entities. Politicians in general abuse and misuse public sector undertakings and government department for their personal gain and for the benefit of political parties they represent. Politicians are white collared and legally authorized terrorists who exploit the system in the same way as terrorists, naxals and various naxal dominated outfits use their power to extort money from all business entities, all affluent common men and most of powerful public servants. Various outfits led by Maoist to spread their reign of terror have accumulated wealth and arms by looting public property in the same way as leaders of political parties have accumulated huge wealth for their families and for their political outfits.

2.     It is leaders of ruling party specially that of Congress Party which has ruled this country for major part of freedom who are willfully extending all supports to private players in the name of economic reformation or in the name of privatization and globalization., all types of privileges are available to private players and all types of obstacles are for state run entities.

3.     In the name of social welfare schemes , all types of government sponsored schemes are imposed on public sector undertakings and all types of freedom is given to private business houses so that they earn maximum profits even to the extent of hundred times of cost of product they produce. On the one hand Free or subsidies power, free oil ,free fuel , free banking, free insurance etc are provided to common men in the name of social obligation and on the other tax concession, interest concession, free land, tax holiday in special economic zones etc are extended to private business houses in the name of reformation even if these players earn profit to the extent of thousands of crores of rupees per year.

4.     Recruitment, promotions and transfers in government sector takes place on the basis of bribe and flattery. There is no respect for performance and honesty in government departments and in public sector undertakings. Only those officers who are corrupt, who flatter to bosses , who are perfect yes-men  and who earn bribe and share with bosses are posted at key posts and are given quickest promotion violating all normal norms and all normal ethics of promotions whereas those who do not abide by illegal orders of bosses are posted at most critical post and in remote areas or in defunct post. ON the contrary promoters and managers of private business entities give value and give attractive packages  to only those who contribute maximum profit , who mobilize maximum business, who are capable of selling their products ,who are honest and who extend best service to their clients.

5.     Why government is unable to strengthen and enhance the efficacy of police department and Indian judiciary which are supporting to only corrupt and powerful persons and which are almost a hurdle in the path of justice and honesty. Corrupt people get all patronage by police and Indian courts whereas cases of common men who are victim of the system are not decided even after lapse of decades.

 It is normally pleaded by advocates of reformation and privatization  that since state run departments and PSUs do not perform, government is bound to sell them or to privatize them or to allow private players so that public sector undertakings slowly and gradually collapse. They say that private players are allowed or will be allowed in the field of coal , mining , power generation or power distribution , railways and so on.

I would like to say here that after exposure of several scams in government departments it is crystal clear now that large scale corruption is eating away lion’s share of government fund and ministers who lead the government at state or at central level are incompetent, inefficient, incapable and corrupt.

Since majority of government departments and majority of Ministries have failed in discharge of their Constitutional duties and hence they are fit for removal. Will government allow private managers to lead and manage these government departments?

Ninety percent of elected representatives fail to serve their constituencies. Will government make a provision which enable voters to recall their elected representatives?

Will government allow private rating agencies to rate the performance of elected representatives and punish those who do not perform as per standards set by the government?

Even CBI, CVC. Ombudsman, judges fail to perform as they are supposed to as per polices framed by Government of India. Will the government establish completely independent Jan Lokpal as demanded by Team Anna and Team Arvind Kejriwal to protect the interest of common men?

If telecom, coal, bank, insurance, railways, airlines etc can be give to private sector , why not judiciary, police, government departments, ministries, defense etc should also be handed over to private players? 

Last but not the least,

Why not government does take steps to ensure good governance in public sector so that they may serve the common men in the best way?

Why the individuals appointed in public sector become dishonest and non performer and the same individuals become best performer when they joins duty in private sector?  

Why does the government carry out true introspection?

Why government fails to manage the affairs as private players like Tata manage their business entities?

Fake currencies are in circulation in huge quantities in the market. 

Will government allow private players to print currency notes?

I think government will never allow printing of new notes by private sector business houses. Similarly banks are dealing in public money and hence private banks should not be allowed to use, abuse, and misuse public deposit for their vested interest.

Private players will definitely use the public deposit for lending to few needy persons from common men  but may abuse the same for exorbitant spending on themselves, on employees and on marketing and similarly they may misuse the public deposit for growth of their own business network .  There is an old proverb to understand the character of these private players   "Gau mar kar Juta Dan". 

When the corrupt government is unable to regulate and monitor public sector undertaking which are hundred percent control of the government , how can they control private players ?

Perhaps this is why private banks have misused public money , have indulged in money laundering , have allowed black money to be parked in bank, have promoted unhealthy culture in mobilizing deposits from public, have bribed ministers and politicians to acquire cost free deposits from government departments  and so on.They are not bound to take part in social welfare schemes and they are bound to serve common men whose deposit they acquire through their marketing wing.

Why more banks should come up, soon-LiveMint----

(Please read Comments of TOI readers given below)

A set of new banks will strengthen and expand the industry and add to the resilience of the state-run banks

Tamal Bandyopadhyay

At least a dozen Indian companies have been working overtime on their strategies to enter the banking sector which Reserve Bank of India (RBI) is opening up for private entities after a gap of a decade. In the first round, 10 private banks were given licences in 1993-94 and another two were allowed entry in 2003-04 but never ever was an industrial house allowed to start a bank. In fact, India nationalized its banking industry, run by industrial houses, in two phases in 1969 and 1980.

The government wants more banks to expand banking services in Asia’s third largest economy, where around 40% of the adult population does not have access to such facilities. While many private companies and public sector undertakings are busy drawing up plans and banking consultants and head hunters are skipping their breakfasts and lunches daily to grab more business, there are Cassandras who have started predicting that RBI will develop cold feet and delay the process of granting licences. There has also been talk of corporate houses wooing political parties with the usual items of persuasion to influence the decision of who gets a banking licence.

Indeed, RBI should be extremely careful about the selection process, but nobody would say we don’t need more banks. Apart from expanding, new entrants will intensify competition and benefit consumers. In fact, banking and insurance are a unique space where the entry of new players actually strengthened the incumbents and benefited both the industry as well as consumers unlike many other pockets of the Indian economy where competition decimated existing players.

For instance, let’s take a look at the automobile market. Maruti Udyog Ltd, a child of economic liberalization, was the first to challenge the duopoly of Hindustan Motors Ltd and Premier Auto Ltd, and later many others joined with newer products and marketing strategies to bury the home grown duo. In the past decade, car sales have catapulted from 900,000 in 2003-04 to 2.6 million in 2012-13 and the number of car makers has increased from two to 21. Today, Hindustan Motors and Premier together have less than 1% market share.

The scene is no different in aviation. India’s oldest airline Air India reported the biggest loss among public sector undertakings in 2011-12. It now claims a 20.30% market share in domestic passengers behind IndiGo, Jet Airways Ltd and SpiceJet Ltd. Until 1995, it had been the Maharaja of the airline business.

It’s no different in the telecom or consumer finance businesses. Before the entry of private players,Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL) ruled the roost, the second in New Delhi and Mumbai and the first everywhere else.

Private sector participation in the Indian telecom sector has been a gradual process with the government first allowing private entities to provide paging and mobile services, followed by fixed-line or basic services. The number of telephone subscribers in India in January was 893.15 million with 862.62 million of them mobile users. Private operators hold 87.78% of the wireless market share and BSNL and MTNL the rest. However, BSNL and MTNL have a 79.34% share of the fixed-line market but the subscriber base in this segment was just 30.53 million in January.

Finally, until the late 1990s the consumer durables market in India—televisions, refrigerators, washing machines, air-conditioners—was dominated by Indian brands such as Videocon, Godrej, Kelvinator,Onida, BPL and Voltas, among others, and transnationals only had a marginal presence. Today,Samsung, LG, Sony, Whirlpool collectively have at least 60% of market share and many local brands have died.

This has not happened in the insurance and banking sector. Life Insurance Corp. of India, the state-run insurance giant, continues to garner about 72% of new business premium every year in a market inhabited by 22 private players, 13 years after the sector had opened up.

The pack of state-run banks—which now constitute about 70% of India’s Rs.75 trillion banking industry—has indeed lost their market share to new-generation private banks but none of them have been killed and the loss in market share is not dramatic by any yardstick despite the fact that they are run by highly unionised employees who are not paid well and till recently they were not technologically well equipped. The private banks’ entry has made them more aggressive in product innovation and customer retention by improving services.

Instead of meekly surrendering to the technology-savvy modern banks, India’s state-run banks learnt from them and got better. The key reason behind their resilience and never-say-die spirit is the government’s decision to list them on bourses simultaneously when it opened up the sector for private players. The government never sold its stake in these banks directly. Instead, the banks raised money from the public, expanded their equity base, and, in the process, the government’s stake was pared. That has been a gradual process, giving time to the public sector banks to prepare themselves to face a new constituency, investors, by caring more for their consumers and focusing on profitability instead of balance sheet expansion.

A set of new banks will strengthen and expand the industry and add to the resilience of the state-run banks, besides deepening the government bond market. Competition can bring down the bond yield too, benefiting the government, which is grappling with high fiscal deficit. More importantly, competition will benefit the consumers. Let many new banks come up, even if a few of them die.

PS: The next Banker’s Trust will appear on Thursday, 2 May. I am taking a break next weekend.

http://www.livemint.com/Opinion/1lsTvnTSM1gYWB8IT49dqI/Why-more-banks-should-come-up-soon.html

Valuable comment by Mr. sreeram 

The author seems to be proxy to govt policies and seems to have lost his independent thinking. During license raj, the manufacturers of cars or new entrepreneurs wanting to make latest technology cars, were NOT given licenses. Further, PSU banks suffered because of govt own policies. The politicians were touring all over the world, yet they never implemented anything that is even part of indigenous creative thinking./ technology properly. 

The congress sycophants say Rajiv Gandhi brought computerization to india, if it is so, why there is NO e governance or payment mechanisms to pay property bills or land records NOT available online nor cannot check land records or ownership online ? even after 20 years of his death ?? 

So journalists do not be beggars at Congress office. Stand on your legs. The banking application of SBI or any other PSU is as good as trash except for ICICI bank. Private banks increased misery of people by selling credit at cost of kidney or liver !!!!

Valuable comment by AA49 • 

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If more banks are required, why is MOF is thinking of merging few of the existing PSU Banks with bigger ones. The whole logic is flawed- which private sector bank has made notable contribution in financial inclusion? 

We must also be very much clear to ourselves- while all policies and regulations are in place because of RBI, there is no mechanism to ensure their compliance. 

Cobra post revealations are not an isolation- they actually represent the modus operandi, when large volumes are involved. PSU banks do not indulge in such practices, because they have no incentive to do so- which are in abundance in private sector.