ABCDEFG Plan to Assist PSBs: Overview

ABCDEFG Plan to Assist PSBs: Overview

Question: Government has announced a reform plan ABCDEFG for ailing PSU banks. Provide an overview of this reform plan.

A-Appointments:

- Government will be hiring bankers from the private sectors to head PSB banks and hired MDs and Chairpersons for 5 PSUs so far: Bank of Baroda, Punjab National Bank, Bank of India, Canara Bank and IDBI Bank

B-Bank Board Bureau

- The government will establish the Bank Board Bureau as a regulatory body for assessing PSU performance and monitoring important performance indictors of state banks

- Banking investment company will hold all assets of the banks, the shareholding assets of the government with the banks and will evolve after formation of BBB

C-Capitalisation

- GoI has made the announcement to capitalise state banks by INR 70,000 crore over the next 4 years

- First tranche of INR 25,000 crore will be released in 2015 from which INR 10,000 will reach weak banks

D-Distressing

- Rising bad loans have taken a toll on many PSBs

- GoI will concentrate on distressing banks’ bad loans

E-Empowerment

- GoI will make it easier for PSU banks to hire talent and recruit even at the middle level where they already have the freedom to hire on contractual basis

- ESOP is also on the way for PSB management

F-Framework of accountability

- GoI will release a framework for improving PSB accountability and have top grade governance and autonomy

G-Governance Plans

- GoI will introduce Indradhanush plan for revitalising PSBs

Facts and Stats

- 7 Point Reform Plan to reform PSU banks comes after infusion of INR 70,000 crore in PSBs of which INR 25,000 crore will be released in this fiscal

- The gross NPAs as a percentage of total advances increased to 2.04%, from 1.56% in the year-ago period.

- The net NPAs also increased to 0.93% from 0.81%