Economic Survey 2019-20:Public Sector Banks(PSBs)

News:The Economic Survey has dedicated an entire chapter to the status of public sector banks and the NPA crisis.


Survey on Public Sector Banks:

  • Since 1969,India’s Banking sector has not developed proportionately to the growth in the size of the economy.
  • India will need at least eight banks in the top 100 banks globally to become a $5 trillion economy.Currently,it has only the State Bank of India with 55th rank in the world’s top 100 banks.

Problems in PSB’s:

  • PSBs are inefficient compared to their peer groups on every performance parameter.
  • In 2019,investment for every rupee in PSBs on average,led to the loss of 23 paise while in private banks it led to the gain of 9.6 paise.
  • Credit growth in PSBs has been much lower than Private Banks for the last several years.
  • PSBs enjoy less strategic and operating freedom as compared to private banks.
  • Public Sector Banks are wary of taking risks in lending or in renegotiating bad debt due to fears of harassment under the veil of vigilance investigations.


  • Employee Stock Ownership Plan(ESOP) for the Public Sector Banks(PSBs) employees.
  • Representation on boards proportionate to the blocks held by employees to incentivize employees and align their interests with that of all shareholders of banks.
  • Creating a Public Sector Banking Network(PSBN) similar to GSTN that uses technology to screen and monitor borrowers comprehensively to prevent any build-up of bad loans in the future.