In the wake of globalisation and intense competition from foreign and private sector banks, the government wants a blueprint on the public sector banks for the year 2030.
The finance ministry has set up a high level committee to study the same. Besides, the Indian banking industry received a huge jolt last month when global rating agency Moody’s downgraded its outlook for banks.
“The committee would look into core areas of capital requirement, reach, network, business and human resource of banks in 2030 to face competition and be able to boost and support a growing economy, accordingly the finance ministry will take appropriate steps,” a government official who did not wish to be identified told HT.
Besides, the government is also chalking out a 10 year roadmap, looking into the issue of infusing capital into other banks and financial institutions. It has decided to infuse nearly Rs 4,50,000 crore to bolster the capital base of public sector banks spread over a 10-year period. This year itself ending March 31, 2012, the government plans to infuse Rs 20,000 crore into various banks, including SBI.
A senior government official who did not wish to be identified said that the capital support is aimed at strengthening the tier I capital of the banks. As per regulatory requirements, banks are required to maintain a minimum of 8% tier-I capital, which broadly refers to shareholder equity. The committee is yet to decide on the possible methods of capital infusion and will submit its report shortly.
State-owned banks have also witnessed a surge in the level of bad assets in the last few months. “Though typically the level of bad assets rise during times of slowdown, the government wants to be careful and take no chances and is keeping a close watch on the issue,” the official said.