Why Did Odisha Govt Quickly Reverses Its Decision Of De-Empanelling 3 Pvt Sector Banks?

It’s now an embarrassing moment for the Odisha government’s Principal Finance Secretary, Saswat Mishra IAS who took a hasty decision of dropping three major private sector banks — HDFC, ICICI, Axis — from its panel of banks authorised to handle the state government’s business. And surprisingly, he chose to reverse his decision on June 21 with a clarification that no new account shall be opened henceforth by the respective banks till the banks improve their performance parameters. Many questions have been raised over Mishra’s action. Was it the pressure from Delhi that saw Mishra reversing his decision? What went wrong in the first place for Mishra to de-empanel them? The real story, sources say, is that all these three banks, listed on the stock exchanges, fearing NPAs refused to lend small ticket loans to the weaker section of the society without collaterals, citing the danger of black money routing scam and the inability of the recipients to pay back, particularly PMEGP scheme. This seems to have upset Mishra. Though his official stance is “the action on three banks were taken because of their consistently poor performance in the banks flagship schemes spread over two years”. Clued-in observers say Mishra has opted for carrot and stick policy in dealing with the banks. At the moment the three private sector banks are in a quandary as to how to protect themselves from potential NPAs without collaterals and meeting fiduciary responsibilities amidst RBI’s continued apprehension regarding the danger of unsecured lending.