Banking reform panel likely this month; Tems may include consolidation road map 

“The intensive discussions of today and tomorrow come at a time we expect the announcement on the high-powered committee to look into banking for Viksit Bharat. Sooner, the committee will be announced,” she said addressing the two-day Public Sector Banks Conclave here. 

 Sources indicated that the panel may be formed this month itself. 

Issues for the panel’s consideration might include creating larger Indian banks through consolidation, raising foreign direct investment limits in public sector banks, rationalising investor voting rights, and reviewing regulatory requirements like the Cash Reserve Ratio and Statutory Liquidity Ratio. Banking licence norms could also be part of the review, though this could not be confirmed.

The exercise comes as the government looks to revive the bank consolidation agenda after a gap of nearly six years. The long-term objective is understood to include creating four large Indian banks. In his recent Independence Day speech, Prime Minister Narendra Modi stressed the need for at least one Indian lender to aspire to be among the world’s top five

Sitharaman said the deliberations at the conclave would provide substantive inputs to the proposed committee as it examines the future direction of India’s banking system.

“So, the committee would probably have that material before them even as they deliberate. And even as they deliberate, to give us their thoughts and also the recommendations which will help us to clearly understand where the committee wants India to go towards Viksit Bharat and in that the role of banks,” she said.

The committee was proposed in the Budget speech on February 1 and is expected to undertake a fundamental review of the architecture of the banking sector and recommend reforms aligned with India’s long-term growth ambitions.

Among the issues likely to come under its consideration are the creation of larger Indian banks through consolidation, raising foreign direct investment limits in public sector banks, rationalising voting rights for investors and reviewing regulatory requirements, including the Cash Reserve Ratio and Statutory Liquidity Ratio. Banking licence norms could also form part of the review.

The exercise comes as the government looks to revive the agenda of bank consolidation after a gap of nearly six years. The long-term objective is understood to include the creation of four large Indian banks, with Prime Minister Narendra Modi in his Independence Day speech stressing the need for at least one Indian lender to aspire to be among the world’s top five.

“Viksit Bharat 2047 is not too far away. There couldn’t have been a better time to talk about banking for Viksit Bharat, especially after the grind that all of the PSBs & financial institutions have gone through, recognising difficulties and coming out towards the route of reform,” she said.

“The NPAs are at the lowest ever Indian banking has seen, and therefore, there cannot be a better position of strength with which you can take on reforms,” she added.

The first day of the conclave focused on four themes — deposit mobilisation, banking for youth, supporting the investment cycle and Global Capability Centres. The discussions brought together the leadership of public sector banks and public financial institutions, senior government officials and domain experts to identify emerging opportunities and strategic priorities for the financial sector.

Sitharaman highlighted the importance of ensuring that the banking system responds to the aspirations of India’s young population. She noted that 29% of the country’s population is between 15 and 29 years of age, underlining the need for banking products and services to evolve with the needs of younger customers.

Financial Services Secretary Sanjay Lohia urged PSBs and public sector financial institutions to anticipate emerging opportunities, strengthen institutional capabilities and draw on successful practices across institutions.

The second day will focus on agriculture and horticulture value-chain infrastructure, priority-sector lending and reimagining the credit-card business, followed by presentations on actionable strategies and innovative solutions emerging from all seven thematic groups.