Public Sector Banks Should Find Own Avenues to Generate Funds: Sandhu

Public sector banks should find their own avenues to generate funds and not rely forever on the government for capital, a top Finance Ministry official said today.

"We are taking recapitalisation of banks in a big way but ultimately the banks, whether private or public, have to manage their affairs by generating their own revenue. The government cannot endlessly keep on providing capital," G S Sandhu, financial services secretary, said at an event here.

During the current fiscal, the centre has earmarked Rs 11,200 crore for capital infusion in state-run banks.

He said as the banks have to meet the Basel III norms (needed for stable global banking system), the government will raise money for the next four years by way of equity capital.

The government and RBI have said state-run banks alone will need over Rs 2.4 trillion capital by FY19 to meet the Basel III capital norms.

Mr Sandhu said the government is preparing a blue print so as to make public banks strong and help drive the economy.

The process will start sometime later in the year. "We want to depend on the Budget as little as possible because of other pressures on the Budget which we have to cater to."

To a query over whether Finance Ministry is okay with banks levying charges on customers for ATM usage beyond five transactions, Mr Sandhu said with this lenders are just trying to cut down losses and subsidy.

"The ATMs (installation and maintenance) cost money. All the banks are incurring heavy expenditure on these ATMs and there operations. So they are in a way subsidising that. This is just curtailing that subsidy."

He said as going to a branch for withdrawal of money is a time-consuming affair, it would be up to customers to use ATM or go to the bank.

He said the government will install more number of ATMs, point of sale machines and also propagate use of mobile phones for transactions.

Asked about the holding company structure in the banks, Mr Sandhu said there was no progress so far on this as the government is working on raising more capital for banks.

"The holding company structure is being discussed with Reserve Bank. There are some issues which we have to get over. So once those issues are cleared then we will decide whether we want to have holding company and how many holding companies would be there," he said.