The government is weighing a fresh round of reforms in the financial sector, with a focus on creating stronger, more competitive institutions, a CNBC TV18 report stated, citing sources. According to the report, further consolidation among public sector banks (PSBs) is not ruled out, aimed at raising the foreign direct investment (FDI) cap in PSBs.
The Centre, it added, may also consider merging public sector general insurance companies to boost operational efficiency and strengthen their financial health, especially in light of poor underwriting performance and capital limitations in the sector.
According to the people familiar with the matter, the Centre believes that India needs larger and stronger banks to meet the evolving credit demands of a growing economy.
Simultaneously, the government may also consider raising the 20 per cent cap on foreign investment in public sector banks, aiming to attract more foreign capital and strengthen capital adequacy.
It is also worth noting that the government may be open to allowing corporates to enter the banking sector, provided there are adequate safeguards, a robust regulatory framework, and approval and supervision by the RBI.
While no formal announcement has been made yet, the deliberations indicate the government’s continued push towards the financial sector reforms, aimed at boosting resilience, capital availability and investor interest.
