Ram Pratap Gupta dirtying their hands with the business of development.
CONCLUDING COMMENTS The primordial problem facing PSBs today is that they have become dysfunctional due in part to the lending fatigue and in part to the flawed public debt policy, PSBs are investing a disproportionately large size of their resources in government securities well above the stipulated SLR requirements. This has led to sub-optimal use of the banking sector's resources, crowding out productive sectors; and it has also tended to promote fiscal profligacy. While liquidity accumulates with the banking system, productive sectors stagnate, starved of credit. Although the BSR report has failed to diagnose this malaise, RBI would do well to address this issue on a first priority basis. All other recommendations of the BSR report embodying the second dose of reforms, patterned on the Washington Basle models, would be rendered ineffective, if this fundamental problem is not tackled first. Granting of autonomy to individual banks, distancing the bureaucracy from the management of PSBs, improving the work ethic in banks and motivating the staff- these should form the essential components of the reform package. The somnolent rural credit delivery system needs to be overhauled. The growth ingredient should be reintroduced in the algorithm of utilisation of the banking sector's resources. PSBs should reinvent themselves by dirtying their hands with the business of development, by lending credit support aggressively to the high growth segments of the economy. Addressing these core issues, which have become systemic, alone can ensure the healthy growth of the banking system: not privatisation, nor the accountant's approach of raising capital adequacy ratios, or higher provisioning.
