The need for effective Public Sector Banks (PSBs) has been re-emphasised by the Prime minister through a webinar on effective implementation of Union Budget 2021 provisions regarding financial services.
The reforms in PSBs always remain in the economic debates. In February 2021, Government also announced to privatise two public sector banks in the year 2021.
This makes it important for candidates to know about Mission Indradhanush for PSBs that was launched by the Government in 2015. The government, to resolve the issues faced by the Public Sector Banks, launched a 7 pronged plan called “Mission Indradhanush.”
The Indradhanush for PSBs mission aims at revamping the functioning of the Public Sector Banks to enable them to compete with the Private Sector Banks. It seeks to revive economic growth through the reduction of political interference in the functioning of PSBs and improving credit. It is important to read the topic, ‘Mission Indradhanush for PSBs’ for the IAS Exam.
Start with learning the Types of Banks, notes of which are provided in the linked article.
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Candidates should know that Mission Indradhanush for PSBs is a different scheme than Intensified Mission Indradhanush which is the Ministry of Health’s initiative.
Components of Mission Indradhanush for PSBs
Many of the measures are suggested by the PJ Nayak Committee on the banking reforms. The 7 components of the Mission (symbolic of 7 colours of the rainbow) plan to address the challenges faced by the Public Sector Banks. The 7 components include:
- Appointments: Besides induction of talent from the Private Sector into the public banks, separation of the posts of Chief Executive Officer and the Managing Director, in order to check the excessive concentration of power and smooth functioning of the banks.
- Bank Boards Bureau: The appointments Board of the Public Sector Banks would be replaced by the Bank Boards Bureau (BBB). Advice would be rendered to the banks in the matters of raising funds, mergers and acquisitions etc by the BBB. It would also hold the bad assets of the Public Sector Banks. The BBB separates the functioning of the PSBs from the government by acting as a middleman.
- Capitalisation: Due to the high NPAs and the need to meet the provisions of the Basel III norms, capitalization of banks by inducing Rs. 70000 crore was planned.
- De-stressing: Solving issues arising in the infrastructure sector in order to check the stressed assets in the banks by strengthening the asset reconstruction companies. Development of a vibrant debt market for PSBs.
- Empowerment: Providing greater flexibility and autonomy to PSBs in hiring manpower.
- Framework of Accountability: The assessment of the banks would be based on a few key performance indicators. It would be inclusive of
- Quantitative Parameters such as Non-Performing Assets Management, growth, diversification, return on capital, financial inclusion and
- Qualitative Parameters such as steps taken in improving asset quality, human resources initiatives etc.
- Governance Reforms: Banker’s Retreat or the Gyan Sangam conferences between the bankers and the government officials for resolving the banking sector issues and deciding the future course of action.
Candidates should also read about a scheme that was launched in 2016 for the structuring of stressed assets and was called, ‘S4A Scheme‘. It stands for Scheme for Sustainable Structuring of Stressed Assets.
Some important Banks-related topics that should be read for civil services examination are:
|Repo Rate||Cash Reserve Ratio|
|Bank Rate||Statutory Liquidity Ratio (SLR)|
|Marginal Standing Facility (MSF)||Monetary Policy|