FM Jaitley Meeting With IBA

Government open to dilute its stake in public sector banks to 52%: FM -LiveMint-28.09.2015

Finance Minister Arun Jaitley has said that the government is open to dilute its stake in public sector banks to 52 per cent. He said that “We are willing to look at all other changes including bringing down government equity to 52 per cent (in state-run banks), and therefore giving additional financial strength and teeth to the banking institutions themselves”.

Jaitley who was addressing the 68th Annual General Meeting of Indian Banks Association, also said the state-run lenders need to be given independence and should be kept away from any political interference. He added that even Prime Minister Narendra Modi has said that no bank should ever receive formal or informal directives from the government and had advised the banks to operate essentially and exclusively on banking considerations.

The FM said that government would also consider other issues including problems tied to distressed state power providers. He further stated that our distribution networks through the national grids have improved, but the final access is by the state discoms and at the level of state discoms reforms have been carried out in very few states. He further said that RBI has put those state governments on notice that if they do not charge adequately and make users pay for the power supplied the banking system at its own peril cannot continue to support them.

In the major public sector banks, the government owns over 59 per cent stake in largest public sector lender SBI, 76.5 per cent stake in IDBI Bank, nearly 64.5 per cent equity in Canara Bank, in excess of 59 per cent n Punjab National Bank, in Bank of Baroda, the government holds 57.5 per cent, in Allahabad Bank over 60 per cent, 61 per cent in Andhra Bank, 64.4 per cent in Bank of India and 81.5 per cent in Central Bank of India.

FM SRI. ARUN JAITLEY’S SPEECH AT ANNUAL GENERAL MEETING
OF IBA ON 28-09-2015- By Pannvalan

HIGHLIGHTS OF HIS SPEECH	MY COMMENTS
Government is working on a slew of sectoral reforms, including a new law on fast track arbitration, in a bid to address the stressed areas of the banking sector.	FM has spoken about ‘Exit Policy’ that is in final stages of preparation and the draft will be put out for deliberations early next month. He also said the proposed new Arbitration Law provides for Fast Track Arbitration with one member Arbitration Board, with a mandate to complete the entire process within six months. Shri Jaitley also said the Dispute Resolution Tribunals (DRTs)’s working was being speeded up by moving most of the transactions online.   Will that suffice?  How the government is going to ensure that these companies will fulfil their written commitments made at the time of their execution of an MOU with the respective governments (centre/state)? What is the government planning to prevent huge pile up of NPAs in public sector banks?  Do they have any workable idea in this regard?
The Government is aware of the challenges faced by the Public Sector Banks (PSBs) and measures were being taken to address each one of them.	He has not specified what type of challenges he refers to.  Going by the announcement/decision to dilute of government’s share-holding in IDBI, we may presume that NDA government wants to test the waters, so that they can implement the same strategy(?) in respect of other PSBs too.  Some mergers may also be on the cards.  Unless a clear cut road map is laid out before us, we cannot make any specific comments on this issue.
Sectors such as steel, power, highways and discoms were mainly responsible for the stress in Public Sector Banks (PSBs).	Yes, agreed. What about stressed assets in other sectors like Telecom, Infrastructure (other than Highways), Civil Aviation, Textiles etc.? What about the large scale scandals in CDRs, involving large companies from any sector?  What steps the government has taken to check the director/s of one defaulter company holding the post of director in other companies?  What is the role of Company Law Board vis-à-vis SEBI and Ministry of Corporate Affairs (read as political establishment)?  Has he ever examined these points in depth?
Very few States had carried-out power sector reforms and the situation would not improve, unless the users were made to pay for the electricity consumed.	I agree to some extent.  But, will he comment about the rolling out the red carpet by various states to private power producers, who express their intent to invest very huge amount running into hundreds/thousands of crores of Rupee?  Why do these states offer vast tracts of land at throw away prices (through land acquisition route many a time) to such investors?  Why shall they be offered tax holidays and exemptions/relaxations from the age old labour laws?  What is the amount of sacrifice made by these states over a period of time?  Will he bring out a ‘White Paper’ containing full details, company/investor wise?
Problems of the steel sector are on account of external factors, where cheap imports are hurting the domestic industry.	This is only one side of the truth.  Is he willing to openly discuss the stories of companies like Essar Steel, POSCO etc. who have their manufacturing bases in other countries too?  Are they not offered cheap land and coal for their factories and many other concessions by the states concerned?   But do these companies start their commercial operations as per schedule?  Do these companies create more employment opportunities as promised by them?  Do they meet their export obligations without fail?
The Public Sector Banks (PSBs) have to be given a lot of independence. Of course, they will be carrying-out the developmental agenda of the Government, but their administration has to be based purely on banking considerations.	In reality does this happen?  Let the FM demonstrate the truthfulness of his promise, by withdrawing Finance Ministry’s Nominee and RBI Nominee on the Banks’ Board, as a first step.  Then, in appointments to the top slots of the banks, GOI shall not interfere.  A committee comprising of representatives from RBI, CVC, SCOPE, ICAI and retired bankers must be constituted for this purpose.  Cases of corruption at high places, in which banks also have a role, must be probed and necessary action quickly.
HIGHLIGHTS OF HIS SPEECH	MY COMMENTS
Government may consider reducing its stake in Public Sector Banks (PSBs) to 52 per cent, giving additional financial strength to banks themselves. “We have come-up with a re-capitalization programme for the next four years and hopefully this would induct capital strength in to the banks and improve their capacity”.	The time is not yet ideal for the government to dilute its shareholding in PSBs.  Regarding the recapitalization programme proposed, I wish to wait and see how it is going to take shape.
A high level committee headed by Justice A P Shah, former Chairperson, Law Commission is looking into the options available for Public Sector Banks (PSBs) to recruit the best talent from the market.   Efforts are on to give shape to the Banking Bureau and to professionalize all personnel issues.	I do not support the move to induct personnel from the private sector – including the private financial institutions – at top positions in public sector banks.  First, the organisational culture of PSBs is totally different.  Secondly, their focus and strategies hugely vary from one bank to another.  Thirdly, the government has a great influence on their functions – Lending, HRD (recruitment, placement and promotion), Branch Expansion and Closure, Investments etc. either directly or through RBI.  Unless the government stops exercising too much of interference in the affairs of public sector banks, the so called ‘professionalism’ will not become a reality in PSBs; it will remain a dream only.
Mr Jaitley however opined that the brick and mortar branches may probably lose some relevance in future with alternative internet based channels emerging.	I too agree that the importance of ‘brick and mortar branches’ will come down in due course of time, but they will not lose their relevance nor vanish, given the low literacy levels – that too financial literacy – and the large part of the population still living in rural areas and small towns (with less than 50,000 population). So, technology can only play a supportive and supplementary role here.  Technology cannot become a substitute for ‘brick and mortar’ banking in the next 20 to 30 years.

WHAT IS IMPOSITION?

Imposing one’s views on others

When a person who is in a superior or dominant position thrusts his views and ideas on those below him and they also do not protest and accept them calmly, although their notions and ideas may be radically different, it amounts to imposition of one’s ideas on others.

For instance, a dictator thinks that discipline can be brought about, only by using force.

Imposing one’s choices and preferences on others

When a person by virtue of one’s position and power within a group or organized entity forces others around him to accept his likes and dislikes (in food, dress, books, music, hobbies etc.) they may also keep quiet and fall in line, fearing reprimand and punishment.  But, this compliance of theirs is not voluntary.

Imposing one’s style and behavioural patterns on others

Every one’s style of doing things or saying something will be unique and one cannot say what is right or the best. So, one shall not attempt to impose one’s own style or behavioural pattern on others.  Yet when one does it, those who are weak in terms of their status and position adopt them and repeat them. However, the eccentric and disgusting behavioural patterns will be silently rejected outright by the most.

Imposing one’s language on others

Everybody must have noticed that some people are fond of replying in their pet language or mother tongue, even to questions posed in a different language.  This they do deliberately in order to establish the supremacy of ‘their’ language and to make the opponents feel inferior or subservient.  Thus, they are language fanatics.  

Of all kinds of imposition, imposition of one’s language on others is the worst possible one, because one’s culture and language are intricately and inseparably inter-twined.  Thus, imposing one’s language on another is perceived as a direct, cultural onslaught by the person at the receiving end.

What will be the impact of ‘imposition’ of any kind?

Some people may accept imposition grudgingly.  Some people may volunteer to repeat what is imposed, only with a view to please the powerful and the mighty and receive favours from them.  

‘Suggestions’ from the persons wielding power and authority are construed as ‘succinct imposition’.  Even when some naïve persons do not understand the full import of what has been suggested, there are ‘yes men’ present who will see to it that their boss’s suggestions are received properly and put into practice at the earliest.

No one can deny the fact that what is accepted initially without a murmur or a protest will kindle latent indignation and opposition that will eventually manifest themselves at an opportune moment.

When there is a huge wave of opposition slowly building up against a particular person or a practice or a well organised structure, it will result in an open revolt, one day.

A note of caution:

As I always say, those who derive some benefit from a person or a group of persons, system or a process, eulogise them and sing paeans, whereas those who are directly affected or put to any loss or injury by a particular person or a group of persons, system, structure or a process, will criticise them and fight them.  Depending on the numerical majority and with the norms of fairness and righteousness established over thousands of years, one can easily find out on which side justice lies!

Date 18-09-2015                                                                                                                                      Contributed by Mr. Pannvalan