Prime Minister Narendra Modi will interact with chiefs of public sector banks at a retreat on Saturday to brainstorm over reforms in the banking sector. The bankers' retreat, called "Gyan Sangam", began in Pune on Friday. Instead of formal discussions, PM Modi had called for a retreat to encourage free flow of ideas. The bankers travelled to Pune from Mumbai in a bus. A yoga session is lined up on Saturday.
1) Finance Minister Arun Jaitley, RBI Governor Raghuram Rajan and top financial experts will also be interacting with the bankers at the retreat.
2) The retreat is being organised to find out "what has gone wrong and what should be done both by banks as well as by the government to improve and consolidate the position of PSBs (public sector banks)".
3) The retreat bodes well for the industry, SBI's chairman Arundhati Bhattacharya told NDTV. "Rarely have we had an opportunity where serving bankers have come together and speaking our minds so it bodes very well for us and going forward we will see the effects of this kind of bringing together of minds and for brainstorming and hopefully all of those will be for the good of the industry," she said. (Read | PM Modi's Meet With PSU Bankers Good For Industry: SBI)
4) The bank chiefs have been divided into six groups and each group will present a blueprint for reforms on different areas: asset quality and recovery; financial inclusion, banking structure and consolidation; human resources; priority sector lending; and technology.
5) Asset quality & recovery: The increase in bad debts of banks has been a big worry for the government. Total stressed asset in banks rose up to 10.7 per cent of assets as of September 2014, according to RBI data. Analysts say that the load of bad debts is affecting the banks' ability to lend and it might impact the economic recovery process. The bankers also want inadequacies in legal system to be resolved to help the loan recovery process.
7) Banking restructuring and consolidation: The government needs to infuse as much as Rs 2.4 lakh crore into state-owned banks by end-March 2019 to meet different kinds of capital requirements, the RBI has said. Bankers would be looking for ways to generate more internal capital as the leeway to get additional funds from the government would be limited due to the ongoing fiscal consolidation process.
8) Human resources: This is also a priority area for bankers as a huge number of middle level staff would be retiring in this decade. Besides, to facilitate more financial inclusion, banks need to expand their network.
9) Priority sector lending: This refers to the bank's obligation to meet their lending targets to sectors including agriculture, micro and small enterprises, education and housing. Currently, there is a uniform priority sector lending rules for all kind of banks. Bankers are seeking a change in norms so that it is based on the strength of a particular bank.
10) Technology: Many rural banks are yet to adopt the core banking system. Bankers would be discussing a multi-channel approach like employing handheld devices, mobiles, cards, micro-ATMs, and kiosks to increase financial inclusion. (With Agency Inputs)
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