The Reserve Bank is likely to issue a few bank licences notwithstanding the model code of conduct which came into force from Wednesday, Finance Minister P Chidambaram said.
“What the code of conduct has got to do with this (bank licence process). The Government and regulators are discharging their normal duties... They (RBI) wish to issue a few licences,” he said after a meeting of PSU bank chiefs here.
“So that’s the indication we have got. We are not interfering with that process, that is the RBI’s decision,” he added.The model code of conduct has come into force with the announcement of general election on Wednesday.
last month, the Bimal Jalan panel, which scrutinised applications for new bank licences, submitted its report along with shortlisted entities to the Reserve Bank of India. Guidelines for setting up new private banks were issued in February 2013 and the last day for applications was July 1.The RBI received 27 applications and subsequently, Tata Sons ltd and Value Industries ltd withdrew.
Public sector units, India Post and IFCI and private players such as Anil Ambani group and Aditya Birla group were among 25 players in the fray for bank licences. Bajaj Finance, Muthoot Finance, Religare Enterprises and Shriram Capital have also applied.
Asked about consolidation in the banking sector, Chidambaram said: “I am advocate of consolidation but I have said that the initiative must come from the banks themselves, which means banks have to take their stakeholders into confidence. It has to come from banks.”On capital infusion in PSU banks, the Finance Minister said the government will provide more funds if it mobilises higher resources.
“As you know, Government has provided Rs 11,200 crore for next year. This is not adequate, but that’s the budget estimate... As we find more money, we should infuse more into the public sector banks,” he said.
The Finance Minister said the meeting also deliberated on ways to raise equity capital of public sector banks to support their growth “We have discussed ways to raise additional Tier I capital. Hopefully, we can take them forward. I will discuss some ideas when I meet with RBI board day after tomorrow,” he said.
Chidambaram will address the RBI board on March 7. Worried over a further rise in bad loans, especially among large companies, Finance Minister P Chidambaram has exhorted PSU banks to effectively deal with non-performing assets (NPAs), their biggest challenge.
Addressing the media after reviewing the performance of public sector banks, Chidambaram said the model code of conduct will not affect government functioning or restrain the RBI from awarding new bank licences.
“The biggest challenge facing the public sector banks is NPAs and asset quality...NPAs are high in large corporate sector as well as in the SSI and MSE sector,” he said.
Without providing NPA data of PSU banks for this financial year, Chidambaram said it is “likely to be a little higher” over 2012-13, when NPAs stood at 3.84 per cent. Stressing the importance of addressing NPAs, the minister said, “We have told them (banks) to focus on recovery and banks are focusing on recovery.”
He said the efforts have yielded some results as PSU banks recovered Rs 18,933 crore of bad loans during the nine months through December 2013. Bad loans of PSU banks rose 28.5 per cent to Rs 1.83 lakh crore in March 2013 over the preceding September.
To a query regarding the bad loans of United Bank of India, he said the issue would be discussed separately with RBI Governor Raghuram Rajan on Friday. Kolkata-based United Bank posted a net loss of Rs 1,238 crore in the three months ended December, during which its gross NPAs surged to Rs 8,546 crore from Rs 2,964 crore at the end of March last year. Chidambaram said United Bank had managed to recover Rs 1,200 crore in January and February.