Sinha speaks of govt support and more competition in banking

The government is committed to support public sector banks' capital needs at a time when bad loans are eroding their capital and putting pressure on profits, minister of state for finance Jayant Sinha said, adding at the same time that the government is committed to increasing competition in banking sector.

''As government, we are fully going to support our public sector banks, we fully support all the Basel-III requirements, the banks are going to be fully supported as far as their capital adequacy in concerned,'' Sinha said while addressing bankers at an event organised by industry body Assocham.

He said the government is committed to supporting them by providing capital to meet Basel III guidelines but it wanted them to also deal with non-performing assets by taking appropriate provisions.

Also, Sinha said, ''PSBs need real reforms...Most bank staff don't like customers visiting banks because they have to work then.''

''But we want them also to deal with NPAs, make appropriate provisions and strengthen their balance sheet,'' he added.

Sinha said the government, as part of Indradhanush (reform programme for PSU banks) has laid out how capital support will flow to the banks. "We have said we will provide Rs 25,000 crore this fiscal and an additional Rs 25,000 crore next fiscal".

The minister said the government expects more bank licences to be issued in addition to the 23 granted so far during the Narendra Modi-led government's tenure.

"Our reform agenda is to transform the sector itself. We are changing the nature of competition in banking. Now every bank is going to have to compete for deposits and that is a very good thing. It will mean better customer service, better pricing and more access because banks will have to go everywhere for deposits," Sinha said while delivering the valedictory address at the 11th annual banking summit hosted by Assocham.

The Reserve Bank of India (RBI) has allowed finance companies Bandhan and IDFC to convert into commercial banks. It has also given out 11 payments bank and 10 small finance bank licences.

The government, he said, is open to allowing strategic investors in IDBI Bank, he said, adding that it would use its proposed transformation as an example to show how the public sector banks could be improved

"The innovation that has been unleashed as a result of the competition will bring about wonderful transformation," he said.

Competition aside, Sinha said, the government is planning to improve access to financial services by setting up ATMs in 1.5 lakh post offices across the country.

"Jan-Dhan has established a platform for social security. What we are doing now is to build the access so that we can make it convenient for the last Indian to access financial services, do the cash-in and the cash-out on a daily basis. To that end, we have very important initiatives," he said.

Sinha highlighted the way the government is reforming the public sector banks and in this context he said IDBI Bank will be transformed in the line of Axis Bank.

"IDBI is going through a QIP process and we are open to having a discussion with strategic investors. Let us see how the QIP book-building unfolds and, as part of that, we will be happy to discuss with potential strategic investors how the transformation of IDBI should happen," said Sinha.