Gyan Sangam: 2nd Phase of Bank Reforms to Focus on Bad Loan

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With mounting bad loans, the second edition of the Finance Ministry’s brain storming session with public sector banks focused on management of non-performing assets and consolidation in the sector.

The two-day Gyan Sangaman annual retreat of chiefs of public sector financial institutions, officials from the Finance Ministry and the Reserve Bank of India — recently held on March 4 and 5 in Gurgaon. The last year retreat was held for the first time in pune.

"We have to go through phases in transformation agenda. The agenda would include
     1. Restructuring and mergers and acquisitions of banks
     2. NPA management and recovery
     3. Technology, digital and financial inclusion, 
     4. Credit growth, and 
     5. Risk management.

“This retreat has been held to take forward the government’s commitment to reforms in the banking and financial sector. The growth and change in the financial sector ought to be in tune with the development in the real sector,” said the Finance Ministry, adding that participants would be divided into five working groups to devise strategies for specific sectors.

RBI Governor Raghuram Rajan, Minister of State for Finance Jayant Sinha and Financial Services Secretary Anjuly Chib Duggal inaugurated the meeting. Finance Minister Arun Jaitley addressed the participants.

In his Budget speech, Finance Minister Arun Jaitely had said that a roadmap for consolidation of public sector banks (PSBs) would also be spelt out. The RBI wants to complete the clean-up of bad loans through asset quality review (AQR) by March 2017, and most banks have reported a sharp drop in third-quarter profit, or posted losses because of higher provisioning to cover potential losses.

Banks would also be evaluated, on the progress on the recommendations from the first Gyan Sangam that was held in Pune last year. While allocating Rs. 25,000 crore for recapitalisation of banks in the Budget 2016-17, Jaitley had said the government would also unveil a road map for consolidation in state-run lenders. 

Gross NPAs of public sector banks stood at Rs. 3.60 lakh crore at December-end as against 2.67 lakh crore at the end of March 2015.

Source: The Hindu & The Economics Times

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