Business Today

The Looming Danger

India's banking engine is still to stabilise after RBI's drive to clean up balance sheets and the government's consolidation move even as new pockets of risk build up

In the next five years, the Indian banking system will probably have fewer public sector banks (PSBs) from the current two dozen as the consolidation drive accelerates to create a few large banks. There would also be some serious effort to delink the government, or most specifically the finance ministry, from PSBs by making the existing Bank Board Bureau (BBB) more autonomous, and also to push for Bank Investment Company (BIC) to house government stake in PSBs. There would also be less burden of recapitalisation on the government exchequer as the surplus capital of the Reserve Bank of India (RBI), estimated to be in the region of Rs 1 3 lakh crore, is deployed.

Last but not the least, the fine tuning of the Insolvency and Bankruptcy Code (IBC) with additional infrastructure, especially in National Company Law Tribunal (NCLT) benches, would result in faster resolution of lakhs of crores stuck in stressed assets.

But there is a big 'if' before the script can play out

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