Total deposits in Indian banking system is about Rs.150 lac crores (~$2tn) incl term deposits (~5% ROI), savings (3%) & current ac (0%). Blended cost could be ~ 4.x ?

10 year Gsec yield is 5.95%

even assume 1% spread between gsec yield & cost thats annual rs1.5 lac crores !

60% odd is public sector market share. so about Rs.1 lac crore surplus if PSU banks shun all lending and quietly invest in Gsec

but we have the spectacle of 30% + GNPAs from public sector banks.

this is the system that needs to change. need to get govt out of banking

People ask why is banking license intrinsically valuable? due to this spread engineered by central bank.

cost of operations can usually be recovered via other fee income in any half competent banking operation

spread, if harvested is guaranteed profit once scale is reached

but in a nationalised banking system, successive govts used bank B/S to pay for their profligate policies (off budget items that dont reflect in widely followed fiscal deficit numbers)

add, a venal industry, incompetent managers with retirement days away.

and we handily convert a guaranteed profit business into a voracious black hole consuming all the capital you can throw at it in a perennially capital constrained economy where some citizens can literally starve

why? because, it was fashionable to think of a state as omnipotent

because the comrades feel that laws of science don't apply to nebulous notion of a sovereign balancesheet. where input, storage and output cease to matter

where one can draw endlessly from the state to fund every dream, guilt-trip and current fashion raging in western media

we have given this experiment 50 years. it has run its course. it has done pockets of good but that has been overwhelmed by its negative effects. lets have the humility to say that like all entities even the state cannot be omnipotent and respect natural laws

lets not parrot old commie trope of oh-its-an-implementation-problem and we-can-do-better

the whole world has given up on this good-in-theory-needs-to-be-improved-in-practice farce.

lets recognise this and move on, for the sake of future generations whose toil we eat today

the move to merge PSU banks into 12 bigger entities is a good step. should help manage the disparate brood better

next is to divorce it from Finance ministry into a separate BIC kind company that can plead for capital and be rebuffed by MoF leading to declining stake

recent experience shows that big looking reforms dont sit well with the impacted and the opposition

hence it should be done via the art of possible -executive action and slow dilution of stake while trying to provide good governance