A few things I would like to highlight:
- The report does not recommend privatisation on all public sector banks. It is rather more cautious than, say, the Percy Mistry report. It urges experimenting with sale of a few under-performing PSBs to foreign banks.
- On opening up to foreign banks, the committee does not favour a level playing field with domestic banks right away. It wants abolition of branch licenses for domestic banks, followed by extension of the same to foreign banks with a lag of a couple of years or so.
- It prefers reform of PSBs through overhaul of governance. But some of its proposals, such as the government not appointing top management and leaving this to an independent board, are unlikely to fly. With good reason. 'Leave it to an independent board' sounds very lofty but it risks creating a dangerous governance vacuum where we can least afford it- the banking sector. And now is the not the time to be singing the praise of independent boards in the financial sector-see what has happened to some of the best known names worldwide in the sub-prime crisis.