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Saturday, March 28, 2020

‘Stronger banks: Following amalgamation policy for PSBs’

Non-performing assets of banks have come down in the last few quarters, as banks made provisions for bad loans and stepped up recovery, he said.

By: ENS Economic Bureau | New Delhi | Updated: March 1, 2019 5:14:50 am
Arun Jaitley, public sector banks, RBI, Prompt Corrective Action framework, banks Non-performing assets, banking news, indian express Union Finance Minister Arun Jaitley.

Finance Minister Arun Jaitley Thursday said the government is following the policy of amalgamating public sector banks to create stronger lenders. With five public sector banks exiting the RBI’s Prompt Corrective Action framework, he said the remaining six banks under PCA will try to improve their performance and the government will support them. Non-performing assets of banks have come down in the last few quarters, as banks made provisions for bad loans and stepped up recovery, he said.

“In order to make them (banks) sound, whether it is legislative steps or important steps like creating healthy large banks, which can be globally competitive, the government is also gradually following the policy of amalgamation…,” Jaitley said at event organised by the Indian Banks’ Association (IBA) to launch a report on EASE (Enhanced Access & Service Excellence)-index for public sector banks.

Speaking at the same event, State Bank of India Chairman Rajnish Kumar said the successful “three banks are already in the process (of merging) and April 1 is the date. The success of this merger will determine the future course.” In January, the Cabinet had approved the merger of Vijaya Bank and Dena Bank with Bank of Baroda (BoB). The EASE Index report said public sector banks have shown improvement in recovery of loans, even as the rising NPA trend is now reversing.

Since 2014-15, PSU banks have recovered Rs 2.87 lakh crore bad loans up till December 2018. In the first nine months of current fiscal, the amount recovered by state-owned banks stood at Rs 98,493 crore, a 100 per cent growth over the previous year, as per the EASE Index report. Since 2014-15, the government has infused nearly Rs 2.5 lakh crore in PSBs till February 2019. Punjab National Bank has been ranked first among public sector banks in the implementation of reforms agenda, followed by Bank of Baroda and State Bank of India, according to the report.

The report EASE Reforms for Public Sector Banks, prepared by Boston Consulting Group, measures performance of each PSB on 140 objective metrics across 6 themes, including customer responsiveness, credit off-take and digitalisation, among others. PNB with a score of 78.4 out of 100 has been ranked first in the EASE-index, followed by BoB (77.8), SBI (74.6), Oriental Bank of Commerce (69), Canara Bank (67.5) and Syndicate Bank (67.1). Dena Bank has the lowest score at 53.8.

This index will be published every year to monitor performance of public sector bank. After recovering from the Rs 14,000 crore worth of loan fraud last year, Punjab National Bank showed improved performance in the parameters like customer responsiveness, responsible banking, credit off-take and financial inclusion. Jaitley said release of these rankings brings about competitiveness and encourages banks to perform better than peers.

The six PSU banks, which continue to be under the RBI’s prompt corrective action (PCA) framework, too have been ranked in the report. These are Indian Overseas Bank (66.7), UCO Bank (64.1), United Bank of India (60.8), IDBI Bank (60.2), Central Bank of India (55.7) and Dena Bank (53.8).

Department of Financial Services Secretary Rajiv Kumar said the stress in the public sector banks have gone down following a series of reforms by the government which provided a complete “system reboot”. Clean banking will be the new normal, he said.

The reform agenda is now institutionalised as the EASE Index will be published every year, he said.

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