The finance ministry has asked public sector banks to review their exposure to non-core operations like insurance ventures to conserve capital and promote banking operations.
"They (banks) should look at non-core area investments when big global banks are exiting from their
non-core areas and conserving capital," said a senior finance ministry official.
Many banks, including the State Bank of India, Punjab National Bank, Bank of Baroda and Canara Bank, have many joint ventures in non-core business like life insurance, non-life insurance, mutual funds, etc.
This assumes significance as the government is in the process of infusing R12,000 crore into about 12 public sector banks to enhance their capital base.
At the same, there is huge requirement of capital to meet Basel III, the global capital norms for banks. The global norms, scheduled to kick in from January 1 this year, have been deferred by three months.