Money & Banking

Nobel laureate Abhijit Banerjee warns of banking crisis

Our Bureau New Delhi | Updated on October 22, 2019 Published on October 22, 2019

Prof Abhijit Banerjee addresses press conference on Monday in New Delhi. Photo: Kamal Narang   -  BusinessLine

The 2019 Nobel Prize winner for economics Abhijit Banerjee on Tuesday said the current crisis in the Indian banking sector is frightening and the public sector banking system in the country is paralysed because of fear of investigation.

"The banking crisis is frightening. I think we should worry about it a lot. First, (it was said) that the banks are fine and suddenly there is a problem. That is a sign of the fact that balance sheets somehow are not picking up enough information. We should be vigilant about this is not happening," Banerjee said while addressing a press conference organised by Kolkata based Liver Foundation.

Banerjee, who shared the 2019 Nobel Prize for Economics with his wife and colleague from the Massachusetts Institute of Technology, Esther Duflo and Harvard University professor Michael Kremer, said the government should be seriously thinking about reducing its equity share in public sector banks (PSBs) below 50 per cent so that the Central Vigilance Commission (CVC) does not regulate them. 

"If the government owns more than 50 per cent of the equity then the CVC is empowered to investigate every individual default and this is a paralysing fact for the bankers," said Banerjee, was participating in a workshop on rural healthcare organised by the Liver Foundation together with others.

 

"The banking system is paralysed by fear of investigation and it leads to hiding of faults which then creates bigger problems.The govt should have less equity in banks so that the fear psychosis in the banking sector is removed," said Banerjee, who is currently the Ford Foundation International Professor of Economics at MIT.

"We are seeing a lot of accumulated defaults partly because of the way the banks are regulated. The CVC is very heavy handed... RBI also regulates, so it's not as if checks and balances are not there, CVC is an additional layer in public sector banks," he added.

Rural healthcare

At the press meet, he also talked about the need for using the untrained rural healthcare providers, whom, he said the country cannot afford to ignore if India has to improve the healthcare in rural areas.

One of the primary reasons for Banerjee’s visit to India is to start a conversation with Ministry of Health’s Indian Council of Medical Research (IMCR) and government think tank Niti Aayog on issues surrounding untrained rural health providers. “There is an enormous amount of healthcare provided out of formal healthcare system. More than majority of healthcare is provided by people who are not recognised as healthcare providers, then what do you do in that context? We are hoping to build a research partnership between J-PAL and ICMR in this regard,” he said.

Mobile-phone based technology for healthcare

Taking forward from his published research in 2016 on the need for providing them more training, he said that his team at The Abdul Lateef Jameel Poverty Action Lab (J-PAL) along with researchers in India are investigating whether mobile-phone based technology can help improve decision making among health providers who do not have any medical degree.

In a one-year study, being piloted in West Bengal’s 24 South Paraganas district, upto 100 such providers have been handed over cellphones. “The idea is, if you see symptoms in a patient, instead of deciding what to do on your own, you actually put the symptoms in your cellphone, and see what the expert would say in these circumstances,” Banerjee said.

While The Liver Foundation would conduct intervention training with the providers, J-PAL will conduct Randomised Control Trials by sending ‘guerilla,’ or simulated patients to the health providers, to check whether the training is useful or not in improving the outcome.

This approach adopted by Banerjee and his team changed the way healthcare interventions should be assessed, said Abhijit Chowdhury, Secretary, Liver Foundation.

There are an estimated 15 lakh untrained rural health providers in India. Up to 80 per cent of rural persons first visit the quacks. Banerjee said, “We cannot deny their existence. They may not have an MBBS degree but we have to somehow recognise their existence as frontline workers. You can either deny their existence or given that most of the healthcare is provided by them you can actually regulate, train them and make appropriate standards.”

He also commented on malnutrition and stunting in India being a classic case of half full, half empty glass. “For a long time we had plateaued completely, and now we are starting to improve, but is it fast enough? No! Is it still better news than where we stood five to seven years ago? The answer is yes!,” he said.

 

Also read: PM Modi meets Nobel laureate Abhijit Banerjee

 

Published on October 22, 2019
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