Experts have called for consolidation of public sector banks in India to create bigger banks. But this has not made any headway despite various reports advocating merger of various small public sector banks. There are 27 public sector banks, including five associates of State Bank of India. Finance Minister Arun Jaitley in his first Budget speech on July had indicated the government intention of consolidation in public sector banks.
At present, the country's largest lender, State Bank of India, is ranked in the 60s in terms of asset size in the world. It is the only Indian bank among the world's largest 100 lenders.Jaitley for more autonomy to PSU banks)
PM Modi also called for an end to lazy banking, and asked lenders to take on a proactive role in helping the common man. Top bankers of the country had gathered in Pune to draw up a blueprint for reforms of the banking sector and made presentations to the Prime Minister. It was perhaps the first time that banks had given tasks to the Prime Minister through a presentation, he said.
Banks have sought the government's support in areas like empowering them in recruitment and compensation decisions, simplifying credit issuance, strengthening of legal system to speed to debt recovery, and elimination of loan waiver schemes.
The bankers also suggested reducing government's holding in state-run banks to below 51 per cent.
The Prime Minister also appreciated the efforts of the banks in successfully implementing Pradhan Mantri Jan Dhan Yojana. The Prime Minister said 7 crore families had benefited from direct cash transfers of LPG subsidy in just three days since January 1.
Mr Modi stressed on the huge opportunity banks have in the government's programme to provide housing for all by 2022. As many as 11 crore houses were required, he said.
RBI chief Raghuram Rajan called upon the need to recruit young talent in the public sector banking space and said the government needs to relook its campus recruitment policy which at present is banned because of a Supreme Court ruling.
He also said that for the economy to get back on track, banks need to clean up their bad loans within a year.
The state-run banks recorded the highest level of stressed loans at 12.9 per cent of their total advances in September last year, while the same ratio for private sector banks was at 4.4 per cent, according to RBI data.
(With agency inputs)