Q. With reference to the governance of public sector banking in India, consider the following statements:

  1. Capital infusion into public sector banks by the Government of India has steadily increased in the last decade.
  2. To put the public sector banks in order, the merger of associate banks with the parent State Bank of India has been affected.

Which of the statements given above is/are correct?

  • 1 only
  • 2 only
  • Both 1 and 2
  • Neither 1 nor 2

Answer: (b) 2 only

Notes:
  • Public Sector Banks or PSBs are those banks where the direct holding of the Central/State Government or other PSBs is 51% or more.
  • Capital infusion into public sector banks by the Government of India has not steadily increased in the last decade, there has been a fall in between.
  • To put the public sector banks in order, the merger of associate banks with the parent State Bank of India has been affected.
    • Merging of banks would help in strengthening the bargaining power of the banks, reduce operational expenditure, enhance capital efficiency, streamline banking operations and reduce their NPA burden.
  • The central government invested Rs 3.31 lakh crore in public sector banks between FY17 and FY21.
  • As of December 31, 2022, all PSBs have more than a 100 basis point cushion above the regulatory Tier I capital requirement. It is 10.8% for SBI, 12.6% for Bank of Baroda, 13.7% for Canara Bank, 11.6% for UCO Bank, 12.3% for Union Bank, and 13.5% for Bank of Maharashtra, and 13.6 per cent for Bank of India.
  • After major mergers, these are the 12 public sector banks in 2024.
    1. State Bank of India
    2. Punjab National Bank
    3. Bank of Baroda
    4. Canara Bank
    5. Union Bank of India
    6. Bank of India
    7. Indian Bank
    8. Central Bank of India
    9. Indian Overseas Bank
    10. UCO Bank
    11. Bank of Maharashtra
    12. Punjab & Sindh Bank
Capital infusion into public sector banks