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Thursday, Jul 04, 2002

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Will Mr Jaswant Singh end phone calls from Delhi?

P. Devarajan

GOING by what bankers say, the best of times were when Dr Manmohan Singh and Mr P. Chidambaram ruled North Block. There were no calls or orders from New Delhi to bank chairmen or even RBI to break rules. But that has changed and today any bank chairman gets some 10 to 20 calls daily from politicians and bureaucrats for favours.

In the first instance some of the bank chiefs are beholden to some lobby in New Delhi and do not have any qualms when pay up time comes. They simply oblige and get the necessary sanctions from the board.

Most bank boards are packed with fixers and every one in New Delhi knows them as they are appointed by the Government. One hears of a minister of state pushing the case for licensing a new all-female urban co-operative bank at the height of the recent co-operative bank scam.

Can Mr Jaswant Singh at least bring down the calls from New Delhi to various bank chairmen or RBI? This one measure can bring down the growth of incremental NPAs in the banking system by at least 50 per cent. For that to happen, Mr Jaswant Singh should have a team of professionals picked from outside the system instead of the IAS cadre, which should be banned from messing around with the financial system.

At least for the time being there will be some continuity in RBI with Dr Bimal Jalan getting an extra two-year term. It is not as if the RBI chief is unaware of the happenings in public sector banks; rather nothing can be done about it till Government is kicked out of the job of running banks.

In 1993 the central bank pushed ahead with the idea of licensing new private banks. But after nine years, the new private banks have been as big flops as the public sector banks.

Promoters of these banks have played havoc with the most celebrated case being that of GTB and even today a section of the ruling elite in New Delhi backs Mr Ramesh Gelli. The RBI has not been able to get the boards revamped in some of the badly performing entities though it has enough powers. At least it could appoint some professionals to run the banks on a daily basis.

Reports (no confirmation available) are HDFC may not be all that keen on Centurion Bank or it may be if offered at a low price. Hindujas are still reluctant to maintain the statutory arm's length from IndusInd Bank despite strong reminders from RBI. Which leads one to the style of working in old private banks.

One old private bank in Kerala is insisting on having only a local as its chairman and has rejected the claims of many based outside the State. Again, there is talk of getting the associates of SBI or public sector banks interested in these bodies but none is talking. There may not be any serious systemic ruffle if any of the old private banks go under. Yet RBI is quite unsure and wary of some new scams.

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Will Mr Jaswant Singh end phone calls from Delhi?

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