MUMBAI: State-run banks are sitting on a ticking time and debt bomb and need nothing less than a powerful ‘Sudarshan Chakra’ to nurse them back to health, according to Viral Acharya, deputy governor, Reserve Bank of India. Stating that restoration of public-sector banks’ health was an unfinished agenda that gives him ‘sleepless nights,’ Acharya called for quick and decisive action.
Speeding up the resolution process needs a slew of things including bringing down government stake in PSBs to 52 per cent, selling valuable and sizable deposit franchises to private parties, articulating a feasible plan to address recapitalisation needs, and invoking prompt corrective action (PCA) on relatively smaller banks as test cases for a decisive overhaul.
“The Indradhanush was a good plan, but to end the Indian story differently, we soon need a much more powerful plan – Sudarshan Chakra – aimed at swiftly, within months if not weeks, for restoring public sector bank health, in current ownership structure or otherwise,” Acharya said.
It was in April that Acharya first spoke about bank privatisation. The Cabinet Committee on Economic Affairs and the Union Cabinet have now separately authorised an alternative mechanism to facilitate divestment.
Delivering the 8th R K Talwar Memorial Lecture here on Thursday, Acharya wondered why the bank board approvals of public capital raising aren’t leading to immediate equity issuances when liquidity chasing stock markets is plentiful.
“Can the valuable and sizable deposit franchises be sold off, so that they can operate as healthy entities rather than be in intensive care unit under PCA? Can we start with relatively smaller banks under PCA as test cases for a decisive overhaul?” Acharya wondered adding, “These questions keep me awake at night.”