PSU companies make profits only if:
– they have a monopoly
– price is controlled or quantity is regulated
– the market is very unfair
– there is so much profit that all companies make profit.
PSU banks fall in the 4th category! The government owns about 25 banks – and it has no reason to be in banking. Even with 100% government ownership, the rural penetration is pathetic. ON an all India basis, less than 10% of the country’s population has some banking product. This is really sensational – also because they have NO PLANS FOR THE URBAN POOR.
So if a poor labourer wants to open an account – there is no way he/ she can! The banks are so profitable that they really could not care…but they will not go to rural India – nor will the government allow a few of the branches to be closed or merged.
Take the case of senior citizens – they get treated very shabbily in banks. I know senior citizens who have been sold NFOs – and most of them are still licking their wounds. Senior citizens find it a great challenge to get their TDS certificate (imagine this is still made branch wise, client wise – and normally outsourced to a CA). Why not a bank for Senior Citizens? No, there is no time for that….
I think I can make an argument for 100 new banks, but the Regulator boss ensures that its kids do not face any competition….and they can claim to be profitable….
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