Union Finance Minister Piyush Goyal on Thursday said the government “stands stands solidly behind each of the 21 public sector banks” after meeting the heads of these financial institutions, PTI reported.
He also announced the setting up of a committee to recommend within two weeks to determine how to form an asset reconstruction company, which will expedite the resolution of stressed accounts. Sunil Mehta, the non-executive chairman of the Punjab National Bank, will head the committee.
The minister ruled out further capital infusion into public sector banks, and said that the banks would set up a dedicated mechanism to tackle the matter of bad loans, The Economic Times reported. The banks might set up oversight committees with external experts, to speed up decision making on the matter of stressed accounts in a transparent and speedy manner, Goyal added.
He also said that the government would appoint the heads of five public sector banks in the next 30 days.
Meanwhile, State Bank of India chief Rajnish Kumar told The Indian Express in an interview published on Friday that the bank was already a large institution and more mergers were not advisable. “SBI has already become big,” Kumar said. “My view is that from a systemic risk point of view, it will not be advisable that SBI grows through merger or acquisition. Our normal growth and maintaining of market share is a different matter. You can’t have a banking institution, which already has over 20% market share [go for more mergers]… from the risk management perspective also, it’s not good.”
His statement came in the backdrop of remarks by senior government officials, regulators and others on the need for consolidating the banking sector. Last year, the government merged SBI with five of its associate banks.