PM to attend Pune banking conclave with focus on reforms

Prime Minister Narendra Modi will meet the top honchos of public sector banks during their annual 'retreat' in Pune on 3 January, with an action plan for reforms in the banks on the agenda.

"In view of the importance of the retreat for banks and financial institutions with a view to injecting more money into the system, the prime minister will go to participate in the concluding session," finance minister Arun Jaitley told reporters in Delhi.

Jaitley, along with Reserve Bank of India governor Raghuram Rajan, senior officials of the finance ministry and heads of the public sector banks, will attend the retreat called 'Gyan Sangam', an official statement here said.

"The objective would be to prepare a blueprint of reform action plan. The outline of the reform action plan would be presented to the prime minister Jan 3 at the retreat. Then, further deliberations will take place on this in the presence of the prime minister," it added.

Earlier this month, the government decided to permit public sector banks to raise up to Rs160,000 crore from capital markets by diluting the government holding to 52 per cent in phases so as to meet Basel III capital adequacy norms.

The government controls 22 of the 27 public sector banks through majority holding. In the remaining 5 banks, state-run State Bank of India holds majority stake.

Presenting his maiden annual budget in July, finance minister Arun Jaitley had said that the capital of state-run banks will be raised through sale of shares to the public.

The measure is to meet India's obligations under the Basel banking accord signed by 27 nations on capital adequacy norms to ensure that financial institutions have enough capital on account to meet obligations and absorb unexpected losses.

Upwards of Rs240,000 crore of capital by equity is required to be infused into India's banking sector by 2018.

The Basel III norms, which will come into effect 31 March 2019, were put in place following the 2007-08 financial crisis in the US.

The total government support provided to PSBs towards capitalisation during the past four years was Rs58,634 crore, while the provision for the current year is at Rs11,200 crore. The total market cap of government shareholding as of May 2014, stands at over Rs419,000 crore.