Finance Minister Piyush Goyal on Thursday said that the Government would provide all possible help to strengthen the 11 public sector banks placed under the Prompt Corrective Action (PCA) framework by the RBI to check their deteriorating financial health.
Under the PCA, banks face restrictions on distributing dividends and remitting profits. The owner may be asked to infuse capital into the lender. Besides, the lenders are stopped from expanding their branch networks and need to maintain higher provisions. Management compensation and directors' fees are also capped.
Goyal, who is handling the Finance Ministry after given temporary charge in place of Arun Jaitley, who recovers after undergoing a kidney transplant, met heads of the 11 public sector banks here. “Over the next few days we will ensure that the central Government gives every possible support to further strengthen the resolve of these banks to come out of PCA framework as quickly as is possible,” Goyal told reporters after the meeting.
The 11 banks under PCA are Dena Bank, Allahabad Bank, United Bank of India, Corporation Bank, IDBI Bank, UCO Bank, Bank of India, Central Bank of India, Indian Overseas Bank, Oriental Bank of Commerce and Bank of Maharashtra.
Goyal said the meeting was very useful to understand what has transpired over the last 12-13 years in the banking system. “The 11 banks were represented at the highest level. Every one of the bankers spoke of solutions going beyond history. They are going to work through the day and meet me again late in the evening to prepare the action agenda on a case by case basis,” he said.
Goyal, considered a close associate of Jaitley, has not made a big show of getting additional charge of the Finance Ministry and largely operates from Rail Bhawan.
Jaitley, he said, was recovering very well. “ On Wednesday I had an occasion to talk to him and take his guidance. He has given me some issues which I am following,” he said.
Goyal, who is the minister of railways and coal, further said the priority is to ensure that we can quickly get entire banking system on its feet and shed the legacy that was inherited by this government in 2014. The legacy he referred to was apparently the indiscreet loans given under the previous UPA government. Many companies, especially in the power, steel and telecom sectors, have been unable to pay down their debts due to sectoral issues and slowing economy. To compound the problem, there has been a string of scandals that have come to light over the past couple of months, hurting the image of banks -- the heart of the economy.