The Prime Minister's Office is keen to champion fast-track reforms in public sector banks (PSBs) to lift the overhang of rising bad loans that make it a challenge to re-start the investment cycle and pose a fiscal headache for the government on account of banks' capital infusion requirements.
At the same time, the PMO is looking to overhaul and strengthen government-owned banks' governance structures at the earliest so that the problem of bad loans doesn't return with the next cyclical downturn.
The Narendra Modi government could take a cue or two from private banks whose management and credit appraisal structures have helped them contain the rising tide of non-performing assets that have accompanied India's slowing economy in recent quarters, on their books — compared to their 27 public sector peers.
"The government is looking for ideas in action that can be replicated or scaled up. If the corporate governance and risk management systems of private sector banks are working better, public sector banks need to modernise their approach too else their capital will keep getting eroded," said a senior official aware of the development.
Top officials in the PM's Office have expressed the need for quick reforms in state-run banks to improve their stressed loans position and stronger governance structures to improve their functioning and risk management architecture, according to the official.
Just five of the 27 governmentowned banks presently have net non-perfo ..
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