MUMBAI: Weak banks deserve to be shut, but the government and the RBI have categorically said no such thing will happen.For the past few months, WhatsApp messages are being circulated listing nine public sector banks allegedly on the brink of closure. Panic gripped social media on Friday amid reports that the Bank of India may close 700 ATMs by February.Incidentally, the International Monetary Fund in its latest report suggested privatisation of weak banks. “Exit of weakest banks should be considered, with voluntary transfer of liabilities and good assets to stronger market participants, leaving bad assets behind in liquidation,” it said.
This prompted Rajeev Kumar, secretary, Department of Financial Services, to step in and stem the confusion. “No question of closing down any bank. Govt is strengthening PSBs (Rs) 2.11 lakh cr recapitalization plan. Do not believe rumour mongers. Recap, reforms roadmap for PSBs firmly on track,” Rajeev Kumar tweeted.
Giving a rare clarification, the RBI in a separate statement, said its Prompt Corrective Action (PCA) framework neither impacts banks’ daily functioning nor constrains regular operations.What the framework does is to slip out unwelcome changes to the banks’ rule book preventing them from adding new branches and hiring more people. Instead, it would help rationalise operations to save costs. The central bank has put 10 banks under PCA so far. In April, The New Indian Express reported that at least 10 out of the 22 PSBs may freeze branch expansion, while 16 lenders may cease paying dividends for FY17 as part of the ongoing regulatory crackdown.