Public sector banks: More sinned against than sinners

News: PSB’s have played a key role in the “new welfarism” model of the government. However, the immense effort undertaken by the PSB agencies has not been rewarded adequately.

In this context, a mere comparison of PSB’s with private sector banks is illogical. Because, three-fourths of the banking sector is burdened with social objectives in addition to commercial ones.

PSB’s can perform better if they were given real functional autonomy in their loan, recruitment, salary and reward decisions. For instance, their ratio of the CEO’s salary to that of an average employee is just 3, as against 67 in private-sector banks.

Hence, any measures taken for privatization of PSBs needs a wider debate in a country.

How PSB’s have played a key role in the “new welfarism” model?

Jan Dhan Yojana (JDY) or National Mission for Financial Inclusion

JDY accounts are key to the successful distribution of various benefit schemes. (Pradhan Mantri Kisan Samman Nidhi scheme, Mahatma Gandhi National Rural Employment Guarantee programme, cooking gas subsidy etc.,)

As of the end of 2021, there were a whopping 442 million beneficiary accounts, 295 million of them in rural branches and 147 million in urban centres. Their combined deposits have crossed ₹1.5 trillion.

It was mainly due to the tireless effort of mostly public sector bank (PSB) employees. out of the 442 million accounts, more than 97% were with PSBs or regional rural banks. Barely 12 million were with private banks.

The case of Demonetisation

In a small window of less than two months, more than ₹15 trillion in denominations of ₹500 and ₹1,000 had to be counted, verified and accepted, and exchanged for new notes. Again, much of this was accomplished by staff of PSBs in far-flung branches across the country.

Insurance coverage

The PSB’s also have to sell insurance policies such as Jeevan Jyoti (for life cover) and Suraksha (for accident cover), as also the Atal pension scheme, all of which are products from the government or Life Insurance Corp. These products are important for achieving financial inclusion. The key to success, of these products’ rests chiefly with PSBs.

Emergency Credit Line Guarantee Scheme (ECLGS)

It was launched in the middle of the pandemic to help micro, small and medium enterprises (MSMEs). Even here, the networks and outreach of PSBs and their branches played a significant role.

Source: This post is based on the article “Public sector banks: More sinned against than sinners” published in Livemint on 11^th Jan 2022.