<div>The government on Friday (14 August) unveiled a seven point plan to evamp public sector banks with focus on appointments, Bank Board Bureau, capitalisation, destressing, empowerment, accountability and governance reforms. </div><div> </div><div>According to MoS for Finance Jayant Sinha, "the Indradhanush plan for revamp of Public Sector Banks (PSBs) is the most important step in this direction since the bank nationalisation measure in 1969-70, said Finance Mos Jayant Sinha. "This would give banks the strategic space for adequate competitive positioning," he said . Now each PSB would be monitored; their key performance indicators will also be monitored.</div><div> </div><div>Finance Arun Jaitley said that the PSBs have been facing a challenging situation in the last few years, but there’s no cause for panic or alarm.</div><div> </div><div>Though for some time, the problem went unattended, the situation improved after the Narendra Modi -led BJP government came into power, said the finance minister.</div><div> </div><div>India needs to minimise political interference in public sector banks, Finance Minister Arun Jaitley said, as the government announced measures to improve the performance of state-run banks that are struggling with rising bad loans.</div><div> </div><div>India's banking sector, dominated by more than two-dozen state-run lenders, has been hobbled by its highest bad-loan ratio in a decade as slower economic expansion hurt companies' ability to service debt.</div><div> </div><div>While the pace of additions to bad loans has started slowing for most banks, higher provisioning is hurting their profits. State-run lenders also account for a majority of the sector's bad loans.</div><div> </div><div>Political interference in the functioning of PSBs has to be minimised, he said. Secretary, financial services, Hasmukh Adhia later said that political interference in the functioning of the PSBs had minimised to a great extent after the Prime Minister addressed a gyan sangam of top PSB heads in Jan early this year, and this government went going in reforming the banking sector.</div><div> </div><div><strong>Capitalization</strong></div><div><img alt="" src="http://bw-image.s3.amazonaws.com/chart.jpg" style="width: 458px; height: 155px; margin: 1px;"><br><br>While calculating the capital requirement of extra capital for the next four years up to FY2019 likely to be Rs 1,80,000 crore, the government of India proposed to make available Rs 70,000 crore out of budgetary allocation for four years. </div><div> </div><div>Improved valuation coupled with value unlocking from non-core assets as well as improvements in capital productivity is expected to enable PSBs to raise the remaining Rs 1,10,000 crore from the market.</div><div> </div><div>Adhia also announced the appointment of new heads of five banks, including two from the private sector, as part of fresh measures to improve the performance of the state banks, which are struggling with rising bad loans.</div><div> </div><div>Indian banks may need up to 1 trillion rupees to manage the risks from their exposure to debt-stressed firms, Fitch's Indian unit said this month, on top of the tens of billions of dollars in capital they need to comply with global banking rules.</div><div> </div><div><strong>Problem of NPAs</strong></div><div>Finance Minister Arun Jaitley said there have been problems with the banking sector and they were compounded by problems in sectors like steel, power, highways, discoms, sugar.</div><div> </div><div>As the seven-step reform progamme unfolds, these different sectors too need attention and their problem have to be dealt with to solve the ultimate banking problems.</div><div> </div><div>There has been some positive movement in the highway sector and some steps have been taken in the steel sector, but the problems here are more of external nature. In case of sugar, one package has already been announced; it’s more of work in progress in this sector;</div><div> </div>
