In view of the emerging challenges of globalization and the need to improve performance indices, greater autonomy in operational and managerial functions will provide banks the flexibility and the maneuverability to deal effectively with rapidly evolving situations.

The concept of market mecha-nism, more often than not, goes hand-in-hand with a desirable level of freedom to operate in the competitive space. Autonomy, per se, does not imply complete absence of regulation. It involves more of self-regulation within a prudent supervisory framework. For PSU banks, accordance of autonomy has taken a gradual route, understandably so, so as to ensure that the systemic ramifications are kept to the minimum. In view of the emerging challenges of globalization and the need to improve performance indices, greater autonomy in operational and managerial functions will provide banks the flexibility and the maneuverability to deal effectively with rapidly evolving situations.

Competition, in its true sense, leads to higher efficiency gains. With greater autonomy/freedom in fixing interest rates on most part of assets and liabilities, banks are able to leverage their market segmentation strategy to a great extent. Similarly, operational autonomy has also enabled PSU banks to diversify into new areas like bancassurance, cross-selling activities and exploring the possibility of becoming `Universal Bank'. All these measures are widely expected to discernibly improve both the top and bottom line of banks.

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