Giving a new look for the question of consolidation for public sector banks (PSB)s, Hashmukh Adhia, secretary department of financial service Ministry of Finance, Government of India mentioned that consolidation does not only mean mergers and acquisitions but involves evolving structures which will allow the banks to raise capital easily from the market. Adhia , who was addressing the media at the start of the two days PSB’s Chairman and Managing Director (CMD) conference in Pune on Friday also said that there was an urgent need for reforms in the PSBs.
“There is a wide disparity in the performance of public sector banks and private sector banks. It is in this context that we need to rethink about the strategy for the public sector banks and come out with some thing formidable,” he said. Adhia admitted that although many committees had given their reports in the past, a concrete plan of action has not yet emerged. “The purpose of the retreat is come up with a concrete plan of action for the banks after proper consultation with all the stakeholders and financial institutions,” he said.
The two day retreat which began at the premises of National Institute of Banking Management (NIBM) in Pune will see the CMDs discussing six cardinal issues related to the sector. Adhia said that the topics will include universal financial inclusion, leveraging technology for banking, people management, rethinking on priority sector lending, consolidation and restricting of PSBs and improving risk management asset quality and recovery for the PSBs. Prime Minister Narendra Modi is set to address the meet on Saturday.
Talking about the issue of consolidation of bank the secretary said that consolidation will involve increasing the efficiency of the banks. “Structures should be evolved which will allow the banks to raise capital from the markets easily and improve their balance sheets,” he said. In the past there has been talks of mergers of PSBs which high non performing assets (NPAs) into other banks.
Another topic which the bank CMDs will be discussing will be priority sector lending which at this moment is 40 per cent of the total lending of the banks. “This is a forum which will try to identify what will be the priority sector for the bank as the economy has experienced a major shift. For example now food processing industry is very important now and it was not so in 1969. So we need to suggest to government on what is the priority sector now,” he said.
Talking about the role of financial inclusion the secretary said that the till now 10.3 crores of accounts have been opened under the Pradhan Mantri Jandhan Yogna (PMJY) which has resulted in coverage of 98.41 per cent of the households surveys. The RuPay card has been issued to 80 per cent of the accounts and work for seeding the bank accounts with Aadhar number is going on. “At present 33 per cent of the accounts have been seeded with Aadhar number,” he said.
“All the groups will come up their suggestions and recommendations which will be presented to the prime minister on Saturday. Some of the recommendations the banks will start acting on themselves while for the ones which involves policy level decision the government will follow the due course of the law,” he said.