What Do We Do with PSBs?

We marked the 50th year of bank nationalisation recently. There were mixed views on one of the most important decisions Indira Gandhi took during her tenure as Prime Minister. Some thought that bank nationalisation was entirely motivated by political considerations. They felt that it should never have happened and must be swiftly undone through the privatisation of public sector banks (PSBs).

Others felt that, whatever the political motivation, bank nationalisation was justified on economic grounds. Banks needed to increase their geographical spread and reach out to small enterprises as well as the poor. These objectives were largely met. However, PSBs now have fundamental issues that come in the way of sustained commercial performance. Those in this category also feel that the time has come to drastically reduce public sector presence in banking in favour of the private sector.