Recently, we have witnessed a surge in the the number of non-performing assets (NPAs) in the banking sector. Amongst the top 20 banks with the highest NPAs, 18 are public sector banks (PSBs).
According to a report on The Hindu BusinessLine, State Bank of India, Punjab National Bank, Bank of India, IDBI Bank & Bank of Baroda accounted for 47.4 % (totalling ₹3,93,154 crore) of the NPAs as of June 2017. SBI accounted for the largest share of about 22.7 per cent (or ₹1,88,068 crore) in the total NPAs of the 38 banks.
Here are the 7 major issues faced by public sector banks in India:
1. Generalisation in jobs
Anyone can do any task in public sector banks. The rationale behind this is to ensure that people join the banks in masses by giving competitive exam. However, I think that instead of this, people should be hired on the basis of their knowledge. For example, credit matters must be dealt by a CA or a person with an MBA in finance, marketing matters should be handled by MBA graduates, and so on.
2. More bad debts
Banks, especially PSBs, lent too much to the mighty corporates – at a time when they were already over-borrowed.
3. Lack of competition
In any industry, people compete with each other for the rewards and promotions. But in public sector banks, it seems that promotions are still being given on the basis of seniority.
4. Social burden
The execution of any government’s scheme falls mainly to public sector banks.
5. Their functioning
The functioning of public sector banks seems to be totally copy-pasted from private sector banks – at least, the core banking system, that is.
6. Political pressure
The heads of public sector banks are often chosen by the government. And sometimes, they (the heads) have to return the favour.
7. Job security
Job security is ironically one of the reasons behind the low productivity in public sector banks. The employees here are relatively at ease in comparison to their private counterparts, who are always on the edge.
These are a few issues which should be sorted out in a better way, slowly and steadily. Only then will we see a drastic improvement in the public sector banks in the coming years.