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Create Structures for Easy Capital to PSU Banks: Banking Secretary

Consolidation of the PSU banks have been pending for long and has not made any headway despite various reports advocating merger of various small PSU banks.
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A file photo of Financial Services Secretary Hasmukh Adhia
A file photo of Financial Services Secretary Hasmukh Adhia

Pune: Mergers and acquisitions are not the only way for consolidation in public sector banks, as creating a mechanism for easier access to capital would also improve their balance sheets, Financial Services Secretary Hasmukh Adhia said today.

"This (consolidation) does not necessarily mean that we are only thinking of mergers and acquisitions. Please do not take it that way.

"If we have to give better support to banks, if the banks have to play a complimentary role, can we think of some other structures by which it is easy for the banks to manage their affairs, it is easy for them to get capital from the market and it is easy for them to improve the balance sheets," he said here.

Consolidation of the PSU banks have been pending for long and has not made any headway despite various reports advocating merger of various small PSU banks.

There are 27 public sector banks, including five associates of State Bank of India.

"These are the issues the group would look at and they will come out with some kind of a reason for this," he said at the inaugural day of the two-day 'Gyan Sangam', retreat of bankers.

Finance Minister Arun Jaitley in his first Budget speech in July had indicated government's intention to go in for mergers and acquisitions of public sector banks.

"There have been some suggestions for consolidation of public sector banks. Government, in principle, agrees to consider these suggestions," he had said.

Talking about need to have relook at the priority sector lending (PSL) target, the secretary said, "We would like to generate ideas on what could be the priority sector prescription for the banks in view of the present state of the economy".

At the moment banks have to lend 40 per cent of their total credit to priority sector which include agriculture loan, loans to minority etc.

"Economy has had major shifts from 1969 till now. Now we are into a different era. For example food processing would be very important for agriculture growth, but does not feature on the PSL items," he said.

The first of its kind retreat of bankers and insurers will also deliberate on financial inclusion and direct benefit transfer scheme, two focus areas of the new government.

On financial inclusion, Mr Adhia said 10.3 crore new accounts have been opened under the Prime Minister Jan Dhan Yojana. About 98 per cent households have been covered under the scheme.

"Our intention is to cover all the financially excluded households by January 26 and we are working towards that," he said.

Recognising the importance of this issue, one of the six themes of the discussion is how to achieve universal financial inclusion here. This retreat has been held to take forward the government's commitment to reforms in the financial sector.

The growth and change in the financial sector have to be in tune with the development in the real sector, said the secretary.

"You all will agree that banks and financial institutions are the backbone of the economy. Stronger the bank and financial institutions, stronger would be the growth of the economy," he said.

"When the country is trying to achieve accelerating growth of economic development, it is absolutely essential that banking reforms are thought about, deliberated about," he added.



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