The finance ministry and top management of public sector banks (PSBs) on Friday agreed on a plan for the country to have two large PSBs among the top 20 banks globally. They also stressed that more autonomy needs to be given to bank boards.
The department of financial services’ two-day ‘Manthan’ with PSBs chiefs also addressed issues related to customer service, regulatory changes, credit growth, NPAs, and the need for technological investments to enhance efficiency and competitiveness, according to official sources.
As India’s stature in the global economy grows, with the country slated to be the third largest economy by 2027-28, officials and bankers discussed the creation of large banks, which will have risk-taking ability to support growth in the economy.
How do India’s big banks rank as of now?
Currently, the State Bank of India (SBI) is ranked 43rd globally by assets, and HDFC Bank is ranked 73rd.
“In the backdrop of the current geopolitical situation, deliberations were held on how customer experience and overall bank performance could be enhanced through innovative approaches,” one of the sources said.
Besides the financial services secretary, M Nagaraju, key participants included 12 CMD/MDs of PSBs, executive directors, along with eminent speakers like McKinsey partners and the chief economic adviser(CEA) V Anantha Nageswaran. Reserve Bank of India deputy governor Swaminathan J also participated.
What topics did these sessions cover?
Out of a total of seven sessions, five were held on Friday, covering topics such as technology, governance, and customer grievances, among others.
To harness the demographic dividend, PSBs must direct more capital towards job-rich sectors like MSMEs by financing them with working capital and other needs, the sources said.
Discussions were also held with non-banking players like fintechs, technology companies, funds, and insurers to understand their perspectives and how the regulatory framework must evolve to stay relevant and compatible with this changing landscape.
“The way forward is not heavier regulation, but smarter regulation. Boards should be empowered to govern independently, with tighter supervision rather than day-to-day regulatory intrusion. Regulation must be clear, simple, and focused, not excessively layered or complex,” the source said.
Banks were also advised to channelise more credit to the agriculture sector and MSMEs.