The Prime Minister Narendra Modi government on Friday sought to push the second generation banking reforms, with a heavy dose of capitalisation for public sector banks (PSBs), and unleashing a seven-step plan for improvement in their health, crippled by bad loans over the years.
It also appointed five new heads of PSBs, for the first time, picking two of them from the private sector.
The move comes after the government suffered a reform setback due to Parliament logjam. Called as the “Indradhanush” plan, or rainbow of measures, for revamp of PSBs, the seven-step plan includes setting up of a Bank Board Bureau to chalk out strategies for development of state-owned lenders. The board will start functioning from April 2016.
To give the required push to the bold reforms in the banking sector, the government, for the first time, picked up heads of PSU banks from the private sector. Earlier, the chairmen of state-owned lenders came only from the public sector.
Rakesh Sharma, head of private sector Laxmi Vilas Bank was named as CEO of Canara Bank, and P S Jayakumar, chief executive of real estate developer VBHC Value Homes, was named as head of Bank of Baroda. The heads of Bank of India, IDBI Bank and Punjab National Bank were picked up from PSUs.
“We are coming up with a new policy, where each bank will be monitored on key performance indicators,” Finance Minister Arun Jaitley said, announcing reforms adding that the PSBs were the “lifeline” of economic activity.
The Finance Ministry is set to infuse Rs 25,000 crore into PSBs as a plan for their recapitalisation during this financial year, of which Rs 20,000 crore will be disbursed within a month.
According to the recapitalisation plan, the State Bank of India will get Rs 5,531 crore, Bank of India Rs 2,444 crore, IDBI Bank Rs 2,229 crore, IOB Rs 2,009 crore, Bank of Baroda Rs 1,786 crore, PNB Rs 1,732 crore, Union Bank of India Rs 1,080 crore, and Corporation Bank Rs 860 crore.