Governance reforms in PSU banks needed: Niti Aayog VC  

Niti Aayog Vice Chairman Rajiv Kumar on Friday said that further reforms in banking sector are needed in terms of autonomy and working at arms' length from the government while the government must raise long-term funds for infrastructure financing without solely depending on banks.

In his address at the India Economic Summit, Kumar also said the government must consider tapping capital markets and raise long-term funds for infrastructure financing and the ways could be through routes such as sovereign bonds.

"I think that the next focus will have to be on governance reforms in a very major way, governance reforms in the banking sector, particularly because that is needed.

"Time has come... along with this round of latest recapitalisation and mergers, you do make sure that banks are now governed, managed and bank boards get the autonomy at arm's length distance from the government," Kumar said.

In August, the government decided to merge 10 public sector banks into four with an aim to make global-sized banks.

Kumar said he has been "votary of privatisation of some of the public sector banks", as such a step "does make for a better, competitive situation in the economy, in the financial sector".

Lessening the burden on the banks, he suggested that banking sector alone should not be expected to do the "heavy lifting" to provide funds to finance investments, specially in infrastructure sector, and the government must look at tapping capital markets.

"We do need the government to tap capital markets,where you can get longer-term financing for the longer-term asset creation you need and this is where you want to attract pension funds etc into government," Kumar added.

"Therefore the discussion at least, I don't know where it is at the moment, on sovereign bonds was done...to look at possibilities (to attract fund) because India's external debt to GDP ratio is very low. It is about 22 per cent," he said.

However, the government recently put sovereign bonds in cold storage at least for the fiscal.