{"id":5979,"date":"2018-04-03T10:57:59","date_gmt":"2018-04-03T05:27:59","guid":{"rendered":"https:\/\/teekhapan.wordpress.com\/?p=5979"},"modified":"2018-04-03T10:57:59","modified_gmt":"2018-04-03T05:27:59","slug":"indias-banking-is-getting-privatised-without-the-govt","status":"publish","type":"post","link":"https:\/\/vivekkaul.com\/2018\/04\/03\/indias-banking-is-getting-privatised-without-the-govt\/","title":{"rendered":"India\u2019s Banking is Getting Privatised Without the Govt"},"content":{"rendered":"
\n\u201cShould public sector banks be privatised?\u201d is a question that is being thoroughly debated these days. Arguments have been offered from both sides.<\/p>\n
Those against the idea of public sector banks being privatised like to say that private sector banks also make bad lending decisions and end up with bad loans. Of course, that is true. In the business of banking, some loans are bound to go bad. A bad loan is essentially a loan on which \u00a0the repayment has not been made for 90 days or more.<\/p>\n
Nevertheless, the more important point is what proportion of the loans have gone bad. As of March 31, 2017, the total bad loans of public sector banks stood at Rs 6,41,057 crore. In comparison, the total bad loans of private sector banks stood at Rs 73,842 crore.
\nHence, the bad loans of private sector banks amounted to around 11.5% of bad loans of public sector banks. But just looking at bad loans in isolation isn\u2019t really the correct way.
\nWe also need to look at the total advances or loans of these banks.<\/p>\n
As of March 31, 2017, the total advances of public sector banks stood at Rs 55,57,232 crore. The total advances of private sector banks stood at Rs 22,19,563 crore, or around 40% of advances of public sector banks.<\/p>\n
If the private sector banks were doing as badly as public sector banks on the bad loans front, there bad loans should also have been around 40% of the total bad loans of public sector banks. But that as we saw is clearly not the case. The bad loans of private sector banks are at 11.5% of the bad loans of public sector banks.<\/p>\n
This basically means that the private sector banks operate much more efficiently than public sector banks. Hence, the argument that public sector banks should not be privatised because private sector banks also accumulate bad loans, doesn\u2019t really hold.<\/p>\n
But that isn\u2019t the major point that I wanted to make in this column. What people who suggest that public sector banks should not be privatised do not realise is that the banking sector in India is getting privatised on its own, even though the government continues to own 21 public sector banks. Take a look at Table 1.<\/p>\n
Table 1:<\/p>\n