Moving ahead with reforms to revive the public sector banks (PSBs), the government has constituted a ministerial panel headed by Finance Minister Arun Jaitley that will oversee merger proposals of the country’s 21 state-owned banks. The other members of the panel include Railway and Coal Minister Piyush Goyal and Defence Minister Nirmala Sitharaman.
The decision comes less than a week after the government announced a Rs 2.11 trillion bank recapitalisation plan for public sector banks weighed down by bad loans, seeking to stimulate the flow of credit to spur private investment. Jaitley had said that capital infusion roadmap for PSBs will be accompanied by a series of banking reforms over next few months. The constitution of an Alternative Mechanism is a move in that direction. The cabinet had decided to set up an Alternative Mechanism to fast-track PSBs consolidation.
Besides, the consolidation of struggling state-run banks, which have a market share of about 70% and account for over 80% of bad loans in the Indian banking system, is aimed at building scale and bolstering their risk-taking ability.