Banking Sector measures announced in Budget (The Indian Express, 1 March)
1. The government will infuse a capital of Rs.25,000 crore this financial year intostate-owned banks, which are reeling under the burden of bad loans, Analysts were disappointed that the government had not increased the amount for capital infusion in public sector banks.
2. The government had announced the setting up of Bank Board Bureau, headed by former comptroller general of accounts, Vinod Rai. The four-member BBB is independent of government and Reserve Bank of India.
The BBB is a crucial step because once it becomes operational, the government can distance itself from the process of appointments of chief executives and board members in this bank. Such a move was originally proposed by the P.J. Nayak Committee which was set up by RBI governor.
3. The reduction of government ownership in public sector banks so that public sector banks come under private ownership and could experience increase in efficiency.
4. 100 % FDI allowed and incentives to Asset Reconstruction companies will also help in addressing the problem of bad loans in future.
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