New Delhi, February 8 The government will soon form a High-Level Committee on Banking for Viksit Bharat to develop a plan to create large lending institutions capable of meeting the financial needs of a developed India, Finance Minister Nirmala Sitharaman said.
"We want the committee to tell us what steps we need to take so that banking can be made available to fund Viksit Bharat," she told PTI in an interview.
Asked if it would suggest a merger of public sector banks, Sitharaman said it should not be narrowed down like that.
"It is for India's banking sector to be made large enough, large enough in the sense, to be capable of taking care of the funding needs of Viksit Bharat. You need to reach the destination of Viksit Bharat...it (Viksit Bharat) needs money, it needs financing, it needs credit, it needs banking facilities to reach the common man."
When asked about the timeframe for forming the committee, she said, "We will do it as soon as possible."
"I propose setting up a 'High Level Committee on Banking for Viksit Bharat' to comprehensively review the sector and align it with India's next phase of growth, while safeguarding financial stability, inclusion, and consumer protection," she had said in the Budget speech on February 1.
To achieve scale and improve efficiency in the public sector NBFCs, as a first step, the Budget also proposed to restructure the Power Finance Corporation (PFC) and the Rural Electrification Corporation (REC).
"A lot of work has been done in the relevant ministry. They have come up with this suggestion. Let's see how it unfolds," she said, when asked if a merger is on the cards.
REC is a subsidiary of the state-owned power sector lender, Power Finance Corporation (PFC). Both entities play a key role in funding power generation, transmission, and distribution projects.
In March 2019, PFC completed the acquisition of a majority stake in REC Ltd by transferring Rs 14,500 crore to the government.
PFC acquired 103.94 crore shares, constituting 52.63 per cent stake, held by the government in REC, along with management control. The acquisition price was worked out at Rs 139.50 per share. This stake acquisition came after in-principle approval from the Cabinet Committee on Economic Affairs.
Both PFC and REC are Navratna central public sector enterprises, and this acquisition was a step toward consolidating companies operating in the same space.
Last week, the PFC board gave in-principle approval for the merger of the non-banking finance company REC Limited with itself.
The board approval for the merger of PFC and REC came after an announcement made in this regard in the Budget on Sunday.