Economic Survey observes 2019 as the golden jubilee year of bank nationalization. Accomplishments of lakhs of Public Sector Banks (PSBs) employees cherished and an objective assessment of PSBs suggested by the Survey.  Since 1969, India’s Banking sector has not developed proportionately to the growth in the size of the economy. India has only one bank in the global top 100 – same as countries that are a fraction of its size: Finland (about 1/11th), Denmark (1/8th), etc.  A large economy needs an efficient banking sector to support its growth.

The onus of supporting the economy falls on the PSBs accounting for 70 % of the market share in Indian banking:

• PSBs are inefficient compared to their peer groups on every performance parameter.
• In 2019, investment for every rupee in PSBs, on average, led to the loss of 23 paise, while in NPBs it led to the gain of 9.6 paise.
• Credit growth in PSBs has been much lower than NPBs for the last several years.

Solutions to make PSBs more efficient:

• Employee Stock Ownership Plan (ESOP) for PSBs’ employees
• Representation on boards proportionate to the blocks held by employees to incentivize employees and align their interests with that of all shareholders of banks.
• Creation of a GSTN type entity that will aggregate data from all PSBs and use technologies like big data, artificial intelligence and machine learning in credit decisions for ensuring better screening and monitoring of borrowers, especially the large ones.