Bankers' meet to address performance gap between state-owned and private banks

The retreat will explore best practices in both sectors, including issues of people management, technology, and improving asset quality

The so-called Gyan Sangam (Knowledge Confluence), a two-day retreat for banks and financial institutions being held in Pune, will address a key issue that has plagued Indian public sector banks,  the gap in performance between themselves and their private sector counterparts.

“There is disparity in private sector banks and PSBs. It is in this context that we need to rethink the strategy in PSBs and that is why we have come to this conclave,” said Hasmukh Adhia, secretary, department of financial services. Adhia said there have been several committees set up in the past to resolve issues plaguing the banking sector but a plan that can actually be executed is yet to emerge.

The ministry is hoping that it has something more concrete at the end of the two-day confluence.

This retreat will discuss the sharing of best practices between private banks and PSBs, and the session on the performance gap will feature some of those from Axis Bank, IDBI Bank, State Bank of India and Andhra Bank.

Other sessions will focus on leveraging technology and digitalisation to improve efficiency, achieving universal financial inclusion, improving risk management, asset quality and recovery.

Improving asset quality has been one of the key concerns for the PSBs. According to RBI data, gross non-performing assets (NPAs) in the banking system rose to 4.5% of gross advances in September 2014, against 4.1% in March. During the same period, total stressed assets in banks (gross NPAs + restructured advances) rose from 10% to 10.7%.

Another pressing issue for PSBs has also been people management. “Human resources reforms in PSBs need to be discussed. We need to understand the importance of people. There are issues such as recruitment, training, motivation etc. that will be discussed,” Adhia said.

Rethinking of priority sector lending (PSL) will be another key area that the conclave will focus on. Banks have been asking to expand the definition of what falls in the PSL norms and that the lenders should be allowed to play to their strengths.

“Soon after nationalisation, 1972, 40% target was given and it remains the same. We have not been able to rethink on the figure, either increase it or decrease it,” Adhia said, adding that there is a need to make some changes on that front.

“We would like to generate ideas on what could be the priority sector prescription for the banks in view of the present state of the economy. Now, economy has had major shifts from 1969 till and we are into a different era. For example, food processing would be very important for agri growth, but doesn’t feature on the PSL items,” he pointed out.

Consolidation and restructuring of PSBs is another key topic. “We will see if there is another structure by which we can raise capital, improve balance sheets etc,” said Adhia.

Public sector banks require equity capital of Rs. 2.4 lakh crore by 2018 to meet Basel III norms. In the current fiscal, the government has allocated Rs. 11,200 crore for bank capitalisation.