Deepak Parekh bats for further consolidation in PSU banks, FDI cap hike to boost GDP growth
Mumbai: Veteran banker Deepak Parekh on Monday pitched for banking reforms, including further consolidation in public sector banks and a hike in the sector's foreign
Mumbai: Veteran banker Deepak Parekh on Monday pitched for banking reforms, including further consolidation in public sector banks and a hike in the sector's foreign direct investment (FDI) limit, to support India's ambition of becoming a $30 trillion economy by 2047. The economy would need to expand seven to eight times over the next two decades to achieve the goal, he added. The former chairman of HDFC Ltd said reforms should be undertaken "when the sun is shining", pointing to banks' gross non-performing assets (NPAs) of sub-2%, the lowest in decades. "Public sector banks have already consolidated, but there merits a case for further consolidation," Parekh said, adding that the government had indicated it was working in that direction.
Also Read | Atanu Chakraborty terms HDFC Bank's legal review superfluous Speaking at the 118th annual general meeting of the IMC Chamber of Commerce and Industry in Mumbai, he said higher FDI limits in public and private sector banks would bring in the additional capital needed to finance India's next phase of growth. Finance minister Nirmala Sitharaman had said in February that a proposed high-level committee on banking for Viksit Bharat would examine various sectoral issues, including consolidation. However, the government has maintained there is no roadmap yet for another round of public sector bank mergers. The number of India's state-owned banks shrunk from 27 in 2017 to 12 by 2020, when 10 banks were amalgamated into 4 entities under the government's consolidation programme.
Parekh's remarks on foreign direct investments align with discussions between the finance ministry and the Reserve Bank of India on raising the cap for public sector banks to 49% from 20%. Private sector banks can take in up to 74%. Also Read | World’s largest legal AI startup Harvey doubles down on India as demand grows He also called for deeper debt markets, saying the corporate bond market should double from about 18% of gross domestic product (GDP), and also welcomed the recent tax exemption for foreign investors in government securities. On capital markets, Parekh described the nearly $50 billion of foreign portfolio outflows over the past 18 months as a temporary phenomenon, and said monthly mutual fund SIP inflows of around ₹30,000 crore had helped support markets.
On the issue of artificial intelligence (AI), Parekh said the technology was "not a doomsday scenario" for the information technology services sector, but stressed that India must continue to create 10 million jobs annually. On the geopolitical scenario, he said India had remained structurally strong on the domestic front even as global uncertainties increased. Also Read | Tepid earnings, rupee slide push FPI returns into deep red
The BriefWire