India needs fewer and mega banks in a bid to exploit economies of scale, said Union Finance Minister Arun Jaitley, while addressing the Reserve Bank of India (RBI) board.
During the meet, he also dismissed fiscal concerns pertaining to the welfare programmes announced in the interim budget on February 1.
He said that all the schemes have a cost but a reasonable high growth in terms of revenue is also witnessed in the last five years.
Further, RBI’s Governor Shaktikanta Das said he will be meeting the heads of public and private sector lenders later this week for discussing the transmission of interest rate cuts
“Finance minister in his address broadly outlined the various reforms and policy measures taken by the government over the last four years and the effects thereof,” said the RBI in its official communiqué.
In the meeting, the minister said that the cash transfer for farmers and the pension scheme for the workers in the unorganised sector mentioned in the budget were accounted for.
“All schemes cost, but year after year, our experience in the last five years has been that there has been a reasonably high growth as far as revenues are concerned,” he said, adding that at one stage governments were finding it difficult, particularly in FY13 and FY14, to accommodate even Rs 28,000 crore for the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) programme. “Today it is possible to account 60,000 crores.”
Further, the Centre has announced a Rs 6,000 annual cash transfer scheme for the small and marginal farmers that will be costing Rs 20,000 crore this year and Rs 75,000 crore next year.
“My own experience has been that when we announce schemes and fix a target, they are factored into the budget, which factors in the revenue growth itself,” the minister said.
“Our experience in the past really has been of the SBI merger, now it is the second one which is taking place,” he added, in reference to the amalgamation of Dena Bank and Vijaya Bank with Bank of Baroda. In 2017, State Bank of India (SBI) merged with five of its associates and the Bharatiya Mahila Bank.
“I think India needs fewer and megabanks which are strong because in every sense, from borrowing rates to optimum utilisation, the economies of scale as far as the banking sector is concerned are of great help,” he said.