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A Parliamentary Panel has asked the Government to assess the reasons for rising non-performing assets (NPAs) of the State Bank of India (SBI) group. The Government has been asked to spell out the policy on merging the subsidiary banks with SBI.
The Government must also do an in-depth analysis of the issues relating to merger and consolidation of public sector banks in general, the Parliamentary Standing Committee on Finance headed by Mr Yashwant Sinha, said in a report tabled in Lok Sabha today. The Standing Committee went into the State Bank of India (subsidiary banks laws) amendment Bill 2009, which was introduced in Lok Sabha in December 2009.
A recent Reserve Bank of India (RBI) inspection report is also understood to have expressed concern over the rising NPAs in SBI, which is the country's largest commercial bank.
On allowing SBI subsidiary banks and other public sector banks to raise equity capital by way of ‘rights issue' of shares as well, the Standing Committee said that it expects appropriate amendments to be carried out in the Bill and also the laws regulating the public sector banks so as to enable them to raise capital through rights issue.
Ad hocism in policy
Meanwhile, the Standing Committee has, in its report, noted that there is a strong element of ad hocism in the policy stance and approach of the Government in bringing in legislative changes in the legislation regulating the SBI and its subsidiaries in particular. For instance, though the amendments carried out earlier vide the State Bank of India (subsidiary banks laws) amendment Act 2007 remain to be given effect to, and the present Bill is pending before Parliament, the Government has embarked on merging two of the subsidiary banks with SBI, the Panel report pointed out.
The report also said that the submission that “proposal of merger come from the management of banks themselves” with the Government playing a supportive role as a common shareholder is, in the opinion of the committee, indicative of ambivalence in the Government's approach on merger and consolidation of banks.
The Standing Committee has also pointed out that amendments remain to be made in the State Bank of India Pension Fund Rules. This is detrimental to the retirees of the merged subsidiary banks, the report said.
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