The government should consider privatising public sector banks (PSBs) as over Rs 2.6 lakh crore capital infusion in the past eleven years has had limited impact in improving their health, and the move would also reduce drain on the exchequer, industry body FICCI said today.

The suggestion comes in the backdrop of about Rs 11,400 crore scam in Punjab National Bank involving billionaire jeweller Nirav Modi. “Given the continuous pressure on the government finances on account of weak performance of the banks, the government should consider privatisation of PSBs. This would reduce drain on the exchequer and the money saved could be used for developmental schemes and programmes of the government,” FICCI President Rashesh Shah said.

He argued that a dynamic banking sector is the need of the hour and we should examine if there is at all a case for public sector domination in the banking sector. “India needs sustainable high growth for its socio-economic development which will not be possible in the absence of support from a robust healthy financial sector,” Shah said.

He pointed out that PSBs, which constitute almost 70 per cent of the Indian banking system, are saddled with burgeoning stressed assets. The chamber said recapitalisation of PSBs alone is not a permanent solution and will not be effective unless the inherent issues related to governance, productivity, risk management, talent, customer service, etc. are resolved.