Millennium Post

‘Easy capital to PSBs would improve their balance sheet’

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 on Friday.

"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  M&As of PSBs.

"There have been some suggestions for consolidation of public sector banks. The  government, in principle, agrees to consider these suggestions," he had said. Talking about need to have re-look at the priority sector lending (PSL) target, the secretary said that "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 a 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.
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