Arun Jaitley's 7 Big Announcements to Revamp PSU Banks
Finance Minister Arun Jaitley on Friday unleashed big bang reforms for the public sector banking system in a bid to revitalize capital-starved and corruption-prone state-run banks.
High levels of non-performing assets in state-run banks have made it hard for the government to revive investment or accelerate growth, analysts say. In a big move to revamp state-run banks, the government is working on a 7-point agenda, said Financial Services Secretary Hasmukh Adhia.
The first element of the government's strategy, Mr Adhia stressed, is appointments. Two bankers from the private sector have been appointed as heads of PSU banks in a much-hyped move. Former Microsoft India chairman and current Infosys board member Ravi Venkatesan will become the chairman of state-run Bank of Baroda.
Bank Board Bureau: The government will set up a Bank Board Bureau through which two dozen state-run banks would be monitored for key performance indicators.
Capitalization: The government will inject a total of Rs 25,000 crore of capital into debt-laden state banks in this fiscal; Rs 20,000 crore would be injected in a month. Over the next four years, the government plans to inject Rs 70,000 crore.
De-stressing: Bad loan ratios at state-run banks have near-doubled in the past four years as weak economic growth hurt companies' ability to repay debt. However, the situation of stressed assets is not so bad, Mr Adhia said.
Empowerment: More flexibility will be given to state-run banks for hiring manpower, the government said.
The government will soon come out with a framework of accountability and announced more reforms as part of its strategy to revamp the public sector banking sector, Mr Adhia said.
