The government may consider merging weak smaller public sector banks, and nudge bigger ones to consolidate to create big and strong global banks in India. A banker who attended the Gyan Sangam, or the banker's retreat that concluded in Pune last week, said "Though the government said the decision for the consolidation will be with the bank board, it is only a matter of time before the government nudges the banks to move on path of consolidation as it is in favour of creating big well-run global banks."
However, bankers on their part suggested that the consolidation should be left with the respective bank boards.
On course of creating mega public sector banks, the government has already made public its interest in picking up talent from the private sector to head big public sector banks like Punjab National Bank, Bank of Baroda, Canara Bank and Bank of India. The All India Bank Officers Confederation (AIBOC) have alleged that the government may be on a privatisation drive in the guise of reforms.
Bankers have also put forward a request to the government to lower the government holding in banks to below 51% by forming a banking investment company which will function as an apex body to control ownership and manage the bank boards. Government, however, said the stake sale of public sector banks would be only at an appropriate valuation. The Union Cabinet last month had decided to lower the 27 public sector banks to 52%.
The freedom to take decisions rather than fear the interference from investigating agencies like the CBI, CAG and the CVC (chief vigilance commissioner) is another major request bankers have put forward to the government.
Bankers so far have in many cases desisted from taking some critical credit or recovery decisions for fear that the investigating agencies may question their actions.
Prime Minister Narendra Modi, who addressed the final session on Friday, assured the bankers that there will be no political interference, but there could be political interventions for implementing programmes for rural housing or financial inclusion.
Reserve Bank of India governor Raghuram Rajan made a strong case for cleaning up the banking system and to restructure other possible NPAs (non-performing assets) so that stalled projects go on-stream helping the economy to revive. Total gross non-performing assets of the banking system were Rs 2.43 lakh crore as of end of September 2014. The top 30 NPAs account for Rs 87,368 crore or 35.9% of the total gross NPAs of the public sector banks.
The Pune bankers' retreat was the largest ever confluence of bankers; it had attendance of over 500 bankers, ministry officials and sector experts participating in various sections.
One of the bankers who attended the sessions told dna, "It is for the first time that all senior bankers were meeting at a venue. The bankers were divided into six groups focusing on financial inclusion, priority sector lending, technology, consolidation, risk profile and restructuring, and governance."
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