By Prateek Pyne
A recent report on the privatization PSBs prepared by the National Council of Applied Economic Research (NCAER) suggested that the Centre should privatize public sector banks (PSBs) but the State Bank of India. The report mentioned that the primary reason behind this was that private banks have emerged as a credible alternative to PSBs with substantial market share.
Barring SBI, most other PSBs have lagged behind private banks in all the significant performance indicators during the last decade. They have seen soured loans and operational costs soar. These PSBs have also attained lower returns on assets and equity than their private sector.
The report suggested that the government start the privatization exercises with two strong banks to set a positive example for the success of future privatizations. The statement also read that the banks with the highest returns on assets and equity and the lowest NPAs in the last five years may be chosen.