Nobel economist tells PM: Divest PSU banks

New Delhi: Citing serious concern over the health of the banking sector, Nobel laureate Abhijit Banerjee on Tuesday said the government should consider cutting stakes in state-owned banks to below 51 per cent as soon as possible. To restore the health of the sector, he urged the government v2to bring in important and aggressive chan-ges.

“There is need to bring down the stake of the government to below 51 per cent in banks so that the decisions are taken without the fear of the Central Vigilance Commission (CVC). The fear of vigilance authorities is making state-owned banks take fewer risks, which results in downturn of the sector,” Dr Banerjee said while interacting with mediapersons after meeting Prime Minister Narendra Modi earlier in the day.

The banking system has been affected very badly by rising non-performing assets for nearly five years now. This has led to networth erosion and discovery of scams in the sector, the latest being the Punjab and Maharashtra Coope-rative Bank. Overhang of regulations like CVC also deters officials from taking proper action on irregularities in the system, he said. Dr Banerjee refused to take questions on the state of the economy and refrained from commenting on policies of the NDA government at the Centre. The government has claimed that it has taken several measures to bring down NPAs in the banking system, but the health of public sector banks still looks as poor as it was some years ago.

In August, the CVC had constituted the Advisory Board for Banking Frauds headed by former vigilance commissioner T.M. Bhasin to examine bank fraud over `50 crore and recommend action.

Also in August, finance minister Nirmala Sitharaman had said that the profitability of public sector banks was improving as the total gross NPAs had come down by `7.9 lakh crore at end-March 2019 from `8.65 lakh crore at end-December 2018.