Finance Minister P Chidambaram today asked public sector banks to identify areas for managerial autonomy and expand their presence across the country. He also ruled out privatisation of public sector banks. |
"I want public sector banks to become more autonomous," Chidambaram said at a function marking the launch of 201 automatic teller machines (ATMs) of Bank of Baroda (BoB). He said the proposals for autonomy should come by the month-end. |
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Stressing the need for consolidation of Indian banks, the finance minister said he wanted them to become efficient, large and attain a global scale. "We want banks to finance our growing gross domestic product," he said. |
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Commending BoB on extending the working hours of its 51 branches to 12, he said the days when banks functioned between 11:00 am and 2.00 pm were long over and that Indian banks had been adapting to the changing requirements of customers. |
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BoB, which is expecting to come out with a public issue by September this year, is targeting to expand its network of ATMs to 1,000 by December from the existing 300. |
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The Indian Bankers' Association (IBA) is preparing the proposal on autonomy. But the government will decide on autonomy after considering banks' performance based on their annual MoUs. |
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The MoUs, which public sector banks will submit by the end of this month, will list each bank's minimum assurances on business performance with projections for the next year on return on assets, return on average networth, capital adequacy ratio, earnings per share, priority-sector lending, net interest margin, NPAs, intermediation cost and profits. |
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Qualitative targets on compliance with Basel II norms, use of technology, product innovation, improvement in risk management practices, human resources development and career planning will also be covered. |
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The banking division of the ministry will review the performance of each bank. This will be based on the commitments made by it on a quarterly, half-yearly or annual basis, depending on the rating of each bank and the requirements of the banking division. |
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Banks will be expected to come up with explanations in case they do not meet their commitments. |
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Mid-term corrections in the MoUs will be allowed if the banking division is convinced that it is necessary. |
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The areas in which banks cannot get any relaxation are: dilution of government stake to below 51 per cent, corporate governance compliance, appointment of chairman and executive directors and adhering to MoUs signed with the government. |
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On BoB, Chidambaram said the bank would not return equity to the government as part of a public issue but the government stake would get diluted as the capital got expanded. The government holds 66.8 per cent stake in BoB. |
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The bank is planning to convert some of its branches into financial multiplexes which will offer a variety of financial services besides banking. The bank is planning to introduce 24-hour banking to some more branches. |
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