Articles by T T Ram Mohan

T T Vijayaraghavan (TTV), who passed away recently, was a member of the core group of journalists that launched the Economic Times (ET) in 1961. TTV joined the paper as assistant editor and served it with distinction for two decades.

With credit and deposit growth slowing in key sectors and only retail credit growing, low capital adequacy ratios of banks, senior management changes in the offi ng, and bank mergers, the National Democratic Alliance government needs to ask itself what it envisages for public sector banks, and indeed for the Indian economy.

Indian banking is passing through its most severe period of stress in over a decade. It is important, however, not to draw conclusions for banking policy from a snapshot of the most recent period--the totality of the post-reform experience must be taken into account. That larger experience shows that India's public sector-dominated banking system has served the economy well by improving its performance in respect of both efficiency and stability. Looking ahead, changes in governance and management are required, but it is possible to effect these within the framework of public ownership.

Indradhanush, the government's new plan for public sector bank reform in India, may not be the "big bang" reforms that many have been clamouring for. But the government has decided to recapitalise PSBs--a sensible change of mind. India's recapitalisation cost since the mid-1990s must be amongst the lowest worldwide, and it has helped prevent a banking crisis. Other proposed reforms in Indradhanush follow the framework put forth by the P J Nayak Committee, but fall far short of the paradigm shift policies proposed therein.

Indian private banks have done well over the past decade, and have allayed fears of foreign banks dominating Indian banking. Kotak calling the shots after the merger of Kotak Mahindra Bank and ING Vysya is an example of this dominance. The major player in Indian banking - public sector banks - have not been doing well, especially those with fewer than 2,000 branches. Privatising these smaller public sector banks may help protect larger PSBs, and Indian banking in general.