.......There is need for an explicit policy statement that there would be a break from earlier policies and public sector banks will no longer bail out failed banks. The system should no longer countenance profits being private and losses being public. If such a policy is cast in stone, new banks will have to earn the depositors’ trust only by hard performance. A prerequisite would be that the regulator would put a premium on prompt corrective action, which would be made public, bearing in mind depositor protection and as such it would lead to a more effective regulatory system................
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Capital infusion of the order required - Rs.1,50000cr in the next five years in public sector banks by the Government would be a herculean task in the backdrop of huge budget deficits and staring social commitments and irrational subsidies. Three things strike out prominent in the article that deserve immediate consideration of the government: 1. infusing capital in weak banks should stop; 2. reducing government equity to no more than 51 percent imminent; 3. recovering NPAs that exceed Rs.1,50000cr by even publishing the names of the defaulting corporates (after amending the relevant Act) and its directors brooks no delay.
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