Press Trust of India
New Delhi, Dec 27: As the burden of bad loans turned worse for banks in 2015 especially the state-run players, they are betting big on the seven-point ‘Indradhanush’ reforms to bounce back in the New Year and expect more steps from the government and the RBI to clean up their books. Besides, the commercial banking industry is also gearing up to face a new kind of competition in form of payments and small finance banks that would begin operations in 2016.
Also on anvil could be the government’s divestment in IDBI Bank and setting up of the long-awaited Bank Board Bureau (BBB). Non-performing assets (NPAs) remained a matter of concern for both the government and RBI although the situation is expected to get better by March 2016 as some major decisions are anticipated soon to tackle the issue of bad debts. To revive the fortunes of public sector banks (PSBs), the government in August unveiled a seven-point plan named ‘Indradhanush’ or ‘Rainbow’ encompassing Rs 20,000 crore immediate fund infusion and creation of a single holding company. Moreover, the government has also resolved to set up a Bank Investment Committee, which will act as a holding company for shares on behalf of the government for facilitation of capital requirement through innovative manner. The action plan has also been put in place for a new framework of Key Performance Indicators (KPIs) to be measured for performance of PSBs to bring them at par with the private sectors banks in terms of efficiency.
Gross NPAs of public sector banks rose to Rs 3.14 lakh crore at the end of September 2015. Willful defaulters owe PSU banks a total of Rs 64,334.59 crore, which is about 21 per cent of the total NPA. As of September 30, State Bank of India (SBI) had maximum number of willful defaulters at 1,164 who owed Rs 11,705 crore to the state-run lender. SBI was followed by Punjab National Bank with 764 willful defaulters who have defaulted a total of Rs 9,203.84 crore. ‘Indradhanush’ plan also envisages strengthening of asset reconstruction companies to deal with bad loan situation. As part of its financial inclusion agenda, RBI gave 21 in-principle approval for setting up Payments Banks and Small Finance Banks this year. The approval is valid for 18 months during which the applicants have to comply with all requirements stipulated by the RBI before getting to start their respective banking operations.
Two new full-fledged banks — IDFC Bank and Bandhan Bank have already started operation this year. Financial inclusion and social security initiatives remained focus area for the government this year with Prime Minister Narendra Modi launching MUDRA scheme to fund the unfunded in April and two low-premium insurance schemes — Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) and Pradhan Mantri Suraksha Bima Yojana (PMSBY) and a pension scheme Atal Pension Yojana (APY) in May. PMSBY offers a renewable one-year accidental death-cum-disability cover of Rs 2 lakh for partial/permanent disability to all savings bank account holders in the age group of 18-70 years for a premium of Rs 12 per annum per subscriber. The scheme is managed by general insurance firms.
