The country's top bankers have gathered in Pune for 'Gyan Sangam', a one-of-a-kind huddle to discuss long-pending reforms vital to improving the health of ailing state-run banks.
More than two dozen inefficient public sector banks have been constrained by a pile of bad loans and corporate governance issues. They also lag their private sector peers in profitability.
For years, political interference and union opposition have thwarted major reforms. Many industry observers remain sceptical about big changes being implemented in the near future, especially with the economy still recovering from its worst slowdown since the 1980s.
If reformed, however, the country's major PSU lenders offer investors the best exposure to any sustained upswing in the domestic economy.
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"When the country is trying to achieve accelerated growth in economic development it is absolutely essential that banking reforms are thought about, deliberated upon and implemented also," Financial Services Secretary Hasmukh Adhia, said on Friday.
Besides the heads of all state-owned banks, the two-day meeting ending on Saturday will also be attended by Prime Minister Narendra Modi, Finance Minister Arun Jaitley and Reserve Bank of India (RBI) Governor Raghuram Rajan.
Instead of "imposing any recommendation", the government and RBI will be consulting with all stakeholders in the state banking sector, Adhia told reporters in Pune.
State lenders recorded the highest level of stressed loans at 12.9 per cent of their total advances in September 2014, while the same ratio for private sector banks was at 4.4 per cent, according to the latest data released by the central bank.
PSU banks account for more than 70 per cent of total outstanding loans in the sector.
Public sector lenders are estimated to need as much as US $60 billion in capital over the next four years to meet upcoming global regulations and to build a buffer against rising bad loans.
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