We will soon ensure clean banking: Financial Services Secretary Rajiv Kumar

Public sector banks will be able to restructure MSME loans, says Kumar

Public sector banks will be able to do restructuring of micro, small and medium enterprise (MSME) loans after the RBI’s move to bring five public sector banks (PSBs) out of the prompt corrective action (PCA) framework within a month. In an interaction, Department of Financial Services Secretary Rajiv Kumar talks to Somesh Jha about the MSME issue. Edited excerpts:

RBI has brought two more public sector banks (PSBs) out of the PCA framework. How do you see this move?

Last year, I had mentioned that every PSB is an article of faith and we will improve the situation in a year. This has been achieved. But we will keep monitoring these banks to keep the system robust and ensure that there is no room for deviation from clean banking. We will make sure these banks continue with better performance and improved prudential controls.

When do you expect the rest of the banks to be out of PCA?

With Dena Bank being merged with two others, five PSBs will be left (in PCA) now. There is no target in mind but we will work with a different strategy to help them move out of PCA.

What strategy do you envisage? Is it more to do with capital infusion alone?

It has to be a mixed strategy. Banks like UCO Bank and United Bank have a strong current account saving account or CASA base. But all the PCA banks must show improvement. We are looking at them with a different strategy in a way that their strong areas can become their business models for prosperity.

How will the five PSBs benefit?

First of all, all the lending restrictions will be removed. Public sector banks will be able to restructure MSME loans. Banks will be able to become a part of the country’s growth story once again.