PSBs merger could help banking system: Urjit

RBI Governor Urjit Patel has said the Indian banking system could be better off if some public sector banks are consolidated to have fewer but healthier entities, as it would help in dealing with the problem of stressed assets.

"As many have pointed out, it is not clear that we need so many public sector banks. The system could be better off if they are consolidated into fewer but healthier banks," Patel said while delivering the Kotak Family Distinguished Lecture at Columbia University here.He said since there were cooperative banks and micro-financial institutions to provide community-level banking, "some banks can be merged, as a quid pro quo for timely government technical injection". Patel said a challenge that India's central bank was grappling with was the large stressed banking sector balance sheets.

He noted that a series of measures have been taken in the last year on resolving the problem of the non-performing assets (NPAs), including completion of a comprehensive asset quality review of the banks.

Patel said in the instance of the insolvency and bankruptcy code, the Reserve Bank of India (RBI) has been preparing actively for the next step in an orderly resolution and this will be undertaken concomitantly with the resolution of the weakest bank balance sheets under the aegis of a revised prompt corrective action framework. "One of the things that the public sector banks need to do is to raise private capital from the market and not rely on government largesse," he said.