Hinting at major banking sector reforms in the offing, Finance Minister Arun Jaitley on Sunday said the country is not at a stage where the government can completely exit its holding in the 27 public sector banks.
"There are a series of banking reforms which I am likely to announce…in the days to come, you may find something on that," said Jaitley, who will present the Union Budget on February 29.
Speaking at the CNN Asia Business Forum 2016 during the Make in India Week here, Jaitley said, "I don’t think India has reached a state where the state can pull out of banking altogether."
He further said that in order to professionalise the operations of these state-run banks, which control over 70 per cent of the industry, the government has already committed to bring down its holding to up to 51 per cent.
Public-sector banks are required because they perform a major role in financial inclusion through their geographical reach, Jaitley said.
The government had last year announced the ‘Indradhanush’ programme to revamp the state-run banks. It has already put in place steps to professionalise their management.
The government is committed to zero interference, and keeping an arms-length from these banks and letting the institutions run professionally, Jaitley said, adding "we have erred in the past on this".
The comments from the Finance Minister come days after the state-run lenders posted poor set of earnings for the December quarter. Bank of Baroda and IDBI Bank posted the highest losses in Indian banking history, while others like Indian Overseas Bank and Dena Bank were also in the red.
Those who managed to be in the black witnessed a huge spurt in bad assets and provisioning, attributed largely to an asset quality review undertaken by the RBI.
On the critical question of reforms, and whether the steps taken by the government have been a "quantum shift", Jaitley said the work done by the NDA government is "more than incremental" if we look at the sum total.
On the passage of the GST in the Upper House, Jaitley said he hopes to "negotiate through" in the coming days.