If banks cannot be provided the required capital from government funds, then they should be privatised, Reserve Bank of India Deputy Governor Viral Acharya said on Friday.
He added that while lending excesses happen all over the world, the problems arising from them should be dealt with swiftly. Mr. Acharya, however, pointed out that these were his personal views and did not reflect the views of the RBI.
“If you can’t provide deposit insurance from government funds, then one should consider privatisation,” Mr. Acharya said while delivering a lecture. “If we cannot attract the right leadership or structure the boards (of banks) as needed, then we need to ask the questions as to whether we should have fewer banks or if we need to privatise them.
“Lending excesses do happen..., all over the world,” he added. “But once the problem has occurred, one should look to fix it quickly.”
Mr. Acharya also said that the act of merging stronger banks with weaker banks must be done carefully. “My own sense is that, if consolidation is the objective, then stronger banks should be merged with other strong banks,” Mr. Acharya said. “And, the problems with the weaker banks can be handled separately.”