Damodaran Slams Divestment in State-run Banks

Former Sebi chief M Damodaran on Thursday breathed fire on disinvestment in state-run banks. “There is no dictionary in the world that treats privatisation and deficiency as synonyms,” he said.

While addressing a national seminar hosted by the All India Bank Employees’ Association, Damodaran centred his speech on ‘People’s Money for People’s Welfare’ and delved deeper into the privatisation row in banking system. He rooted his address on the fact that the efficiency was related to ownership, and privatisation did not guarantee efficiency. 

“India is not about the classes. It is about the masses. Given the penetration, structure, and population, private banks would be able to serve the classes only. And the system should not treat a set of people differently on the grounds of the economic status,” said Damodaran, who had earlier served as the joint secretary to the banking division under the finance ministry.

His speech highlighted various leaks in anticipatory mergers and sale of banks. Privatisation has played a major role in pushing the share price of banks. The market cap of Indian Overseas Bank stands greater than that of PNB and Bank of Baroda. “A bank does not become better because its market cap is high, and a bank does not give good customer value if its profits are high,” he said.

The veteran banker made some suggestions to improve the fiscal health and functioning of state-run lenders. He said public sector banks must build their own strengths and push the government to fill up their boards. He wanted an immediate decision on the tenure on the chief executive officer at the PSU banks.

At the end, Damodaran stressed on the need for state-run banks to adopt the working system followed by their private peers. He said this gap in functioning of the two types of lenders must be bridged.