Expert hopes for banking reforms in Budget

Updated - February 26, 2015 05:44 am IST

Published - February 26, 2015 12:00 am IST - HYDERABAD:

Krishnamurthy Subramanian, faculty in Finance at the Indian School of Business (ISB) and a member of the P.J. Nayak committee, which suggested radical reforms in the governance of public sector banks, has expressed the hope that some of the key recommendations will be reflected in the Union Budget to be presented by Finance Minister Arun Jaitley on February 28.

The committee which reviewed governance of boards of banks in India proposed that the government distance itself from several bank governance functions, repeal Bank Nationalisation Act together with SBI Act and SBI (Subsidiary Banks) Act, incorporate all banks under the Companies Act and constitute a Bank Investment Company (BIC) to which the government transfers its holdings in banks.

Talking to The Hindu here on Wednesday, Prof. Krishnamurthy said the governance of public sector banks was ‘really bad’ and NPAs were quite high. He said the government would need lot of capital -- more than Rs. Five lakh crore to make them complaint with BASEL-III requirements which deals with prudential regulation of banks. Referring to the “precarious situation” of public sector banks, he hoped that some of the key recommendations such as creating BIC and ensuring that it was run by banking professionals would be reflected in the budget.

“Governance of public sector banks is ‘really bad’ and NPAs are quite high”

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