these assumptions regarding potential growth were very optimistic and that actual growth has been much lower. the 3 % - limit is therefore relatively generous. iii the ecofin council ’ s decision on 25 november 2003 not to act further on the basis of european commission recommendations regarding france and germany subjected the stability and growth pact to a crisis and an acid test. prior to the decision, some said that if the procedure was not pursued properly in accordance with article 104 ( 8 ) and ( 9 ) of the treaty, the pact was effectively “ dead ”. the press was rife with black humour - “ obituaries ” of the pact were published. i do not share this view. a look at everyday life shows us that violating a rule or norm does not automatically invalidate or “ kill ” it. however, we must do all that we can to implement the pact, to reactivate it and thus to restore the weakened public confidence in the “ maastricht rules ”. the evident confusion and obvious differences of opinions about the fundamental questions regarding the workings of the stability pact as defined by the treaty and the council regulations are cause for concern. does the council of finance ministers have leeway for continuing the procedure if it materially shares the commission ’ s view that a member state has not sufficiently complied with its obligations? can the council adopt a new recommendation ( article 104 ( 7 ) ) even if a member state did not sufficiently comply with earlier recommendations, causing and the commission therefor has submitted another proposal ( cf article 104 ( 13 ) )? finally, does the official declaration of the heads of state or government made in amsterdam in july 1997, according to which the council of finance ministers “ is invited always to impose sanctions if a participating member state fails to take the necessary steps to bring the excessive deficit situation to an end as recommended by the council ”, have only political significance, or does this not also imply that they have committed themselves to comply with the terms of the stability and growth pact? article 31 ( 3 ) of the vienna convention on the law of treaties expressly recognises the possibility of such “ subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions ”. it has therefore become such a fundamental question of credibility that the commission, in its role as the “ guardian of the eu treaties ”, filed an objection to the ecofin council ’ s decision of 25 november with the european court of justice. it is also necessary to avoid “ contagion of other

, 57, 251 2, 70, 426 59, 374 3, 54, 532 2003 – 04 7, 52, 627 2, 97, 903 81, 120 3, 17, 308 2006 – 07 7, 28, 878 3, 81, 449 1, 37, 284 3, 83, 439 2007 – 08 7, 15, 408 4, 00, 611 1, 58, 823 4, 47, 920 2008 – 09 7, 31, 524 4, 72, 493 1, 76, 339 4, 83, 501 2009 – 10 7, 39, 646 5, 55, 874 1, 82, 520 5, 16, 491 2010 – 11 7, 57, 535 7, 15, 914 2, 18, 679 5, 63, 154 the above table suggests that public sector banks are no longer the major employment provider in the financial market and also that their per employee expenses have gone above that of private sector banks. the staff strength of public sector banks have gone down between 1998 – 99 and 2010 – 11 but that of private sector banks have gone up significantly. the per employee expenses of public sector banks have gone above that of private sector banks and today, is more than 150 % higher than that of private sector banks. this is bis central bankers ’ speeches despite the fact that pension expenses of psu banks are not fully reflected in their staff expenses. one thing is, thus, loud and clear – the competitive advantage in terms of staff costs that we always thought the public sector banks had is no longer there. the absence of the cost advantage coupled with the problem of lower productivity underscore the critical need for urgent hr transformation in public sector banks. hence, time has come for us to pay attention to this critical aspect on which our ability to compete finally hinges on. we can no longer postpone this issue. conclusion the public sector banking system in india is standing at an important cross road. there are critical choices to be made and initiatives to be taken. the time is ripe for leaving the old baggage and taking bold measures. these measures would determine the future path of public sector banks and whether they would continue to retain their position of preeminence in the banking space or would they yield to the pressure from their peers in the private sector. considering the importance that banks have in the nation building process, the choices made now could have a bearing on the economic future of