Pitching for greater operational flexibility to public sector banks, Reserve Bank Governor Raghuram Rajan on Tuesday said they can become more competitive by distancing themselves from government influence.
"If public sector banks become competitive, especially if they do so by distancing themselves from influence of the government without sacrificing their 'public' character, they will be able to raise money more easily from the markets.
"Indeed, the better performers will be able to raise more, unlike the current situation where not-so-good performers have a greater call on the public purse," he said.
He was delivering the annual day lecture of the Competition Commission of India (CCI).Rajan said there are well-managed public sector banks across the world and in India.
"So, privatisation is not necessary to improve competitiveness of the public sector. But a change in governance, management, and operational and compensation flexibility are almost surely needed to improve functioning of most PSBs,” he said.
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