With bad debts mounting and demand for capital rising, Prime Minister Narendra Modi will help draw up a banking sector reforms plan in consultation with bank chiefs at a two-day retreat in Pune, named ‘Gyan Sangam’, on January 2 and 3.

“Realising the importance of the meet and the idea that more liquidity needs to be injected into the market, the Prime Minister will be going to Pune to participate in the concluding session of the bankers’ meet,” Finance Minister Arun Jaitly told reporters here. The Finance Minister, along with his deputy, and RBI Governor Raghuram Rajan will also attend the meet.

The meeting takes place at a time when bad debts of public sector banks rose sharply to 5.32 per cent at the end of September 30, against 4.82 per cent on September 30, 2013. Bad debts are technically called non-performing assets or NPAs. In addition, incidences, such as the arrest of Syndicate Bank Chairman and Managing Director SK Jain in a bribery case and deposit scams in some banks have dented the credibility of public sector banks.

The objectives include creating a platform for discussions on badly-needed banking sector reforms, and arriving at a consensus on what has gone wrong and what needs to be done both by banks and the Government to improve health of public sector banks.

The focus will be on the following areas: consolidation and re-structuring of public sector banks for better efficiency and capitalisation, effective risk-profiling and recovery mechanisms, human resources-related issues with stress on training and motivation of staff, global practices and use of technology in banking operations, financial inclusion, financial literacy and direct benefits transfer, priority sector lending and interest subvention schemes.

The meet also aims to get some out-of-box ideas from experts, and top-level managers. It will end with the preparation of a blueprint of a reform action plan which, once adopted, could be implemented by banks and the Government.

“While key reform points are being discussed on many occasions, the fineprint of reforms needs to be outlined. It is important that all stakeholders come together and prepare the outline of such a blueprint,” a Finance Ministry statement said.

Based on the deliberations, the outline of the ‘Reform Action Plan’ will be presented to the Prime Minister on January 3, to be followed up by government and banks.

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