If public sector banks become competitive, and especially if they do so by distancing themselves from the influence of the government without sacrificing their “public” character, they will be able to raise money much more easily from the markets.
Indeed, the better performers will be able to raise more, unlike the current situation where the not so good performers have a greater call on the public purse. Competition will improve efficiency. The second grand bargain will also become irrelevant. Conclusion The banking sector is on the cusp of revolutionary change.