MUMBAI: Months after floating bad bank idea, RBI Deputy Governor Viral Acharya on Friday suggested re-privatization of some of our state-run banks, crumbling under the weight of messy NPAs.
Proposing a 5-point action plan to resurrect the Indian banking system, Acharya recommended divestment, asset sales, mergers and private capital to end the prevailing crisis.
“It’s not rocket science to figure out where the growth potential in our banking sector lies and deposit growth should be allowed to reflect that,” he said stating that the recent RBI guidelines prevent further deposit growth for the worst-capitalized banks, and ensure deposit migration from the weakest state-run banks to healthier public or private banks.
Speaking at an event organized by FICCI here, Acharya underscored that ‘a bank should be something one can bank upon.’
“All this would reduce the overall amount of the government needs to inject as bank capital and help preserve its hard-earned fiscal discipline, which along with stable inflation outlook and the diverse nature of our growth engine, appears to have made India, the darling of foreign investors at the present moment. We should grapple this macroeconomic stability to our shores with hoops of steel,” he said.
Batting for consolidation, he opined that fewer, but healthier banks, was the need of the hour, while cooperative banks and MFIs can cater to community-level banking. “It would offer the opportunity to rejig management responsibility away from those who have under-performed or dragged their feet the most,” he said adding VRS can be offered to manage headcount and usher in a younger, digitally savvy talent pool into these banks.