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Calling for urgent reforms in public sector banks, financial services secretary Hashmukh Adhia on Friday hinted on changes to the priority sector lending norms and evolving new structures that allow banks to raise capital easily from the markets.
Addressing the media on the first day of the two-day banking retreat ‘Gyan Sangam’ in Pune on Friday, he said that consolidation does not mean mergers and acquisitions alone, but also involves evolving structures which will allow the banks to raise capital easily from the market.
“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.
A critical outcome of consolidation would be to increase the efficiency of 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 have been talks of mergers of PSBs which high non performing assets (NPA)s into other banks.
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.
Priority sector lending, which accounts for 40 per cent of total lending of the banks, is another area that needs a review, Adhia said. “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 the government on what is the priority sector now.”
He acknowledged that the low demand for credit is an area of concern and that there is need to increase credit offtake.
The two day retreat will see the bank chiefs discussing six cardinal issues related to the sector — universal financial inclusion, leveraging technology for banking, people management, rethinking on priority sector lending, consolidation and restructuring, and improving risk management asset quality and recovery.
Prime Minister Narendra Modi is set to address the meet on Saturday.
Sinha asks bankers for ‘bold and creative’ roadmap to 8% growth
pune: Minister of state for finance Jayant Sinha on Friday asked bankers to provide bold and creative suggestions to lead the economy towards an
8 per cent growth path.
“He (Sinha) inspired the group to provide bold and creative suggestions, which could lead the economy to 7-8 per cent sustainable and non-inflationary growth,” said a statement. Explaining the government’s stand on empowerment, Sinha said while the government was of the poor, it was also pro-business. “So, the trade-off has to be managed by ensuring that the public sector banks are able to function commercially while financing the poor as well,” he said. He also highlighted the success of the Pradhan Mantri Jan Dhan Yojana under which 10.3 crore accounts have been opened in the last three months. ENS
