Govt may set up expert panel on bank consolidation

Govt may set up expert panel on bank consolidation: Jaitley says employee stock options, strengthening of recovery laws would be put on fast-track


The need for restructuring and revamp of the banking system was recognised within a decade of nationalisation of major private sector banks. In 1991, the Committee on
Financial System (Narasimham Committee) visualised a structure for Indian
Banking System with “three or four large banks that could become international
in character; eight to ten banks with a network of branches throughout the
country engaged in ‘universal banking’; local banks whose operations will be
generally confined to a specific region and rural banks (including Regional
Rural Banks) whose operations will be confined to the rural areasand whose
business would be predominantly engaged in financing of agriculture and allied
There is no point in arguing now that the overhaul and professionalization of public
sector banks (PSBs) should have happened along with bank nationalisation and
there should have been regular ‘health checks’ and ongoing corrections. Just as
a ‘health check up’ does not change the condition of a person, the
re-classification of more loans as NPAs does not alter a bank’s ability to
change. The need of the hour is to support banks to recover their dues from
borrowers who have the capacity to repay, infuse professionalism in the banks’
working and restore the faith in the banking system. As private sector banks
have failed to perform their responsibilities and are not too willing to grow
(their share in banking business is less than 30 per cent), privatising the
existing public sector banks is no solution. The failure of Global Trust Bank
and merger of several private sector banks with PSBs during the four decades
that followed bank nationalisation are fresh in our memory.
M G Warrier 


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