Governments plan on banking sector

Why in news?

Union government is working with new reforms in Indian banking sector to address NPA related issues.

What are the plans on resolution of NPAs?

• Union government has consideration in the resolution of NPAs and treatment accorded to entrepreneurs in industry.
• There are various diagnostics being analysed on a case-by-case basis on the reasons of rising NPAs.
• By determining whether NPAs are emerging because of malafide intentions or due to general economic slow-down, the treatment would differ accordingly.
• Investigating agencies are also mandated to hold the responsibility of the board of directors of banks, chartered accountants, auditors and legal experts associated with the industry where NPAs are rising.

What is plan on PSBs recapitalization?

• Centre’s recapitalisation plan envisaged few reforms, the reforms would be differentiated amongst public sector banks (PSBs).
• PSBs that have managed their balance sheet well will have front-loading of recapitalisation bonds.
• The other banks will receive government support based on their resolve to undertake reforms in a time-bound manner.
• These reforms will be measured in terms of capacity of banks to become “slim and trim” and follow better focused business strategies, including sale of non-core assets.
• The Government is also considering governance reforms for all PSBs, which aims to ensure that money is properly utilised to strengthen the balance sheet of PSBs.

What are the other plans on banking?

• Finance commissions are set up regularly and a permanent fiscal body for setting GST rates has been established.
• The Government is also considering a permanent banking commission to address concerns.
• There are also plans for periodical consideration of well-represented banking committees to provide a strategic road map for reforms.

Source: Business Line