Courtesy BBB – key reforms in PSBs getting kick started ?

In its first meeting since formation, the Banks Board Bureau discussed about consolidation in the PSBs and hinted at consolidating 27 PSBs into 10 PSBs including SBI. This could be a major decision that can affect how the PSBs in India will operate in new age banking era where digital banking and technology are increasingly taking centerstage along with bad loans plaguing the banking system.

 The Bank Board Bureau chaired by former Comptroller and Auditor General (CAG) Vinod Rai is formed to address key issues pertaining the beleaguered PSB industry viz., consolidation of PSB banks, appointment of key officials by the BBB and recapitalisation of the banks. BBB is essentially a temporary board which is supposed to be transformed into a full fledged BIC (Bank Investment Company) which will function as a holding company for all the PSBs owned by the government.

The meeting held in RBI headquarter in Mumbai was headed by MoS Finance Jayant Sinha and BBB head Vinod Rai. RBI governor Raghuram Rajan and deputy governor S.S.Mundra also attended the meeting held on Friday, April 8. While speaking to media later, Jayant Sinha confirmed GOIs intention of going ahead with IDBI’s privatisation and bringing its stake down below 50 percent in the bank. Bank staff union has been opposing the privatisation of IDBI bank and is believed to have pushed the GOI on back foot on the privatisation of IDBI bank, causing a delay in the process.

With the uncomfortable bad debt levels in the banking system, nose diving profitability and eroding capital base, the PSB sector needs reforms at good pace. BBB formation with the stated intention could be a step in right direction addressing the age old problems affecting the PSB sector.