budget 2009

Banking reforms

Union budget is not merely an exercise in tallying accounts for the year. More importantly, it signals the government's intentions and actions that are likely to follow. Banking reforms are expected to figure in the new government's priorities for the year. Expectedly, the debate on consolidation of banks has been renewed. Reforms may not be meaningful or even become counter productive if the goals are not clear. Government owned banks, many of which had come in for severe criticism in the past, have sprung back and are now doing fairly well by international comparison. To try to merge them now seems unreasonable. "If it isn't broke, don't repair it", is a wise American saying.

Government banks have so far made a substantial contribution to economic growth, regional development, employment generation, and redistribution of resources. They are today more diversified, competitive and sound.  They are among the small number of banks in the world to have successfully adopted the Basel I and II norms.

Banking reforms should seek to inspire motivate and activate the mammoth Indian government owned banking industry to play a more dynamic and diversified role in the economy and improve the delivery quality at the consumer end.  The structure and system are already there. It only requires infusion of fresh blood and talent. Reforms should first secure the trust and cooperation of the bankers.  While the government banks have reached global standards in their operations the pay scales and working conditions of the bankers are still at the municipal level.

 

 

The bankers, old or fresh, should be duly compensated for the risks they take, for the responsibilities they shoulder and for the hard work they put in. I wish the budget signals this.

(the author is an Economist with the Indian Overseas Bank for over 25 years and a writer on banking matters)

Dharmalingam Vengopal

Economist

Indian Overseas Bank 

Regional Office

Cross Cut Road

Coimbatore