Bank reforms soon, but won’t exit banks: Arun Jaitley

Just two weeks before the Union Budget, finance minister Arun Jaitley said Sunday that the government would soon announce a series of bank reforms aimed at reinvigorating the sector, that is now grappling with high non-performing assets. He also said, however, that while the government is thinking of reducing its stake in banks, he ruled out the possibility of it totally exiting the banking sector, saying public sector banks play a major role in financial inclusion through their geographical presence.

In an interview with CNN at CNN Asia Business Forum 2016 during the ‘Make in India’ week in Mumbai, Mr Jaitley said: “There are a series of banking reforms which I am likely to announce... In the days to come, you may find something on that.”

Asked if there was a need for the government to stay in the business of banking, Mr Jaitley said: “I don’t think India has reached a stage where the state can pull out of banking altogether. State sector banks have performed an important role, which includes geographical reach and financial inclusion. Banks have an important role to play going forward as well,” he said, adding what was needed was to let banks function independently without political interference.

“The government does have to play at an arms’ length distance in the functioning of banks.

Bank boards have to be professionalised,” he said. The FM’s comments came in the backdrop of rising bad assets in the banking system, with a few public sector banks reporting record losses. The minister said, however, that the government was committed to pare down its stake in public sector banks to around 51 or 52 per cent.

Mr Jaitley also said he was confident about the passage of the long-awaited Goods and Services Tax (GST) Bill in Parliament, saying: “We will negotiate it through in the days to come.”

Asked if the government was doing enough to boost the environment for domestic demand by utilising the windfall gains the government has generated after the sharp fall in crude oil prices, Mr Jaitley said the government used it for infrastructure development with the railways, highways and rural roads being major beneficiaries. “We have seen some improvement in urban demand. Rural demand has remained slack due to two consecutive years of weak monsoon,” Mr Jaitley said, adding that the government will address these concerns in the days ahead.