Privatising poorly run state-owned banks makes more sense

The non-performing assets (NPAs, jargon for bad loans) of state-owned banks are approaching five per cent of total advances; their private sector counterparts have NPAs that are between one-tenth and one-fifth of that level. The critical task facing Indian banking is to quickly improve the risk-assessment capability of the state-owned banks, which account for three-quarters of all banking; and if that fails, then to privatise them. This task is being ignored in favour of a non-solution, the starting of new private banks.

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