There were no rigid prescriptions suggesting that only small- or large-sized banks are good or bad, Mankad said, adding, the Government should provide the right environment to improve banks' profitability. He was speaking at a national conference on financial-sector reforms organised by the Confederation of Indian Industry (CII) in New Delhi on Tuesday.

Reacting to a CII suggestion that big banks and financial institutions (FIs) should be allowed to merge, Mankad said that competitiveness and profitability in the public-sector banks would not necessarily depend on their sizes but would be governed by policies that are good for the economy and shareholders.

To a query on whether India could also consider mergers of banks like the one which took place in Japan recently, Mankad said the Government could not hurry into any decision without considering various factors.

One of themost critical issues in financial-sector reforms relates to the extent of public ownership of banks and the special laws governing them, he said. It is argued that state ownership adversely affects the capacity of even the willing banks to compete in the marketplace, he added.

This is seen as inhibiting efficiency and as a disincentive to dynamic commercial performance because of the compulsion to operate within uniform rules and regulations, Mankad said.

The issues of optimal efficiency, autonomy and ownership are interlinked, and progress in financial-sector reforms depends significantly on the resolution of legal and structural issues, he said.

Mankad said that the relevance of reviewing legal and structural issues needed to be underlined, because, without specific and a well-planned attention to them, the reform process would be incomplete. "We live in a real world, where we face real problems and we have to find real solutions to them."

Pointing out that the 90s saw many new policy initiatives,the finance secretary said that the time had come to lay more stress on implementation. "The impression that reform-related decisions do not get effectively translated into practice is too widespread to be disregarded," Mankad said.

He said the work force deployed in the public-sector banks or financial institutions were among the best, and the conservative outlook amongst some of them could be attributed to the general environment prevailing in their place of work.

He said that many of the problems attributed to pre-emption of resources of banks had been addressed, and that reforms had brought in a good measure of deregulation of interest rates in them.

Several reforms initiatives in the financial sector have been initiated, which includes dismantling of the structured and administrative interest-rate regime, he said.

The prudential norms and the increased capital adequacy ratio introduced in the banking sector are aimed at meeting internationally acceptable standards.

Mankad said that it was alsoessential to initiate technological upgradation in banks and financial institutions, adding, the entry of new private banks had brought in wide use of automated teller systems and other technologies.

The entry of foreign banks has fostered competition and given the corporate sector and individuals multi-option services, he said.