RBI suggests disposing of ailing PSU banks

RBI deputy governor Viral Acharya Thursday said there is a need for a more potent state-run bank recapitalisation plan and also suggested radical measures to tide over government's funds shortage. Quick and decisive action under the plan christened as "Sudarshan Chakra", up by several levels from "Indradhanush" plan of 2015, will strengthen their balance sheets, he said.

"The Indradhanush was a good plan, but to end the Indian story differently, we need soon a much more powerful plan – 'Sudarshan Chakra' – aimed at swiftly, within months if not weeks, for restoring public sector bank health, in current ownership structure or otherwise," Acharya said while delivering the 8th R K Talwar Memorial Lecture here Thursday.

Under the Indradhanush plan, the government had announced to infuse Rs 70,000 crore in state-run banks over four years while they will have to raise a further Rs 1.1 lakh crore from the markets to meet their capital requirement in line with global risk norms, known as Basel-III. Calling for quick and decisive action, Acharya suggested a slew of measures like approaching the capital markets when the equity inflows are high.

"Can the valuable and sizable deposit franchises be sold off to private capital providers so that they can operate as healthy entities rather than be in the intensive care unit under the RBI’s prompt corrective action (PCA)? Can we start with the relatively smaller banks under PCA as test cases for a decisive overhaul?" he wondered.

Calling for quick and decisive action, RBI deputy governor Viral Acharya suggested a slew of measures like approaching the capital markets when the equity inflows are high for restoring the health of public sector banks within months