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In today’s news bulletin, we discuss the negative and the positive. On the one side, we talk about India’s banking sector perhaps opening its doors to private players. On the other hand, we discuss the laptop industry in India. Finally, we take a look at an emotionally penned statement on healing and pain by Meghan Markle.
India’s currently thriving private sector is a result of a concentrated effort in the 90s to bring liberal business policy to India. Indians had tasted freedom, enjoyed global exposure, and now wanted to bring the experience to local shores. Thus began the story of private companies and banks in India. Hark back to the present, Indian banks are slowly being caught in financial traps. We keep hearing stories of how banks are closing. The latest in the series is the Laxmi Vilas Bank. First, it was NBFCs, now it’s banks themselves. Hence the talks of private players investing in banking institutions.
Meanwhile, India’s seen an economic slump that the pandemic managed to push to new heights. Per capita GDP in 2025 may be as low as 12% below the pre-virus estimates according to Oxford Economics’ Priyanka Kishore. Against this backdrop, the RBI’s internal group is reviewing bank ownership. They’re happy to push towards private ownership of banks, giving tycoons the ability to invest in banking corporations. But there’s a catch. Large industrial houses may be permitted to own controlling stakes, but only after strengthening regulation and supervision to deal with the problem of “connected” lending, basically diverting depositors’ funds to their other businesses. Read the full article to understand the implications of this news. Or read our analysis!
Well, for starters, it’s an economic problem, so no matter whether you’re interested in finance, marketing, operation HR, or strategy, this is an evergreen GD-PI topic. Apart from that, it gives you a bird’s eye view of a problem the country faces and is a good problem to think of.
So let’s talk about private players with ownership stakes in banks. This has happened before, in the USA. When steel, railroads, etc were privatized, and industries were eked out by individuals who later monopolized the markets. But we are talking about banks and banking institutions. A highly regulated arena for any private player to invest in, banks and financial institutions are subject to stricter regulation compared to other industries. But if large private corporations do get a controlling stake in banks, they essentially also expect returns. After all, that’s how private industry functions.
While a cash-strapped economy could use the succour these private players provide, it’s also unclear how the industry will benefit from this. In theory, opening the doors of the banking sector to private players sounds like a good step and an innovative solution to our cash flow problems. But if you’ve read George Orwell’s 1987 or studied Marxism, you’ll know that one of the pitfalls of capitalism is that it concentrates wealth and power. With private players owning a controlling stake in banks and financial institutions, it’s probable that the focus is on profits and revenues for the organisations. How this benefits the end consumer remains to be seen. But it does paint a picture where the state-led economy is heading, towards a more privatised, corporate makeover. This could end up being a great way to boost trade, industry, etc.
What do you think? Do you think inviting private players to own a controlling stake in banks will give them more power to shape policy, price and therefore should be heavily regulated? Do you think privatisation of the banking sector is a positive step for India? Are we heading for an eventual monopoly? Share your thoughts and opinions in the comments section below!
Read more about banking regulations and setting up new banks here:
More banks won’t solve the problem of credit supply
According to ICEA, whose members include Apple, Xiaomi, Motorola, Nokia, Foxconn, Flextronics, Lava, Vivo, among others, the domestic market will account for around $170 billion by 2025, and there is a need to look at export markets for rest of $230 billion to meet the target of NPE 2019. Efforts to achieve this will generate 5 lakh new jobs and lead to a cumulative inflow of foreign exchange to the tune of $75 billion and investment of over $1 billion by 2025, ICEA said in a report. Read more about this here.
Meghan Markle is famous for various reasons, the most poignant of which is her straightforward approach to mental health. In these times of a global pandemic, Meghan suffered a miscarriage. In this article, she talks about the road to healing, how to deal with loss, and how to care. Perhaps, she says, the path to healing starts with asking the question “Are you okay?” Read more of the emotional and inspirational article to lift up our spirits!