High-Level Banking Panel to Ignite Sectoral Overhaul; Focus on PSB Mergers and Foreign Investor Rights

High-Level Banking Panel to Ignite Sectoral Overhaul; Focus on PSB Mergers and Foreign Investor Rights​

The Centre is poised to constitute a high-level banking committee within the next two to three weeks to comprehensively review India's financial sector. This move follows the announcement of the panel in the budget, signaling a concerted effort to align the banking industry with the country’s next phase of growth while ensuring financial stability and consumer protection.

The Terms of Reference (ToR) for this critical committee are expected to be finalized within two weeks, according to government sources. This body will address numerous aspects vital for transforming the sector's operational landscape and strategic direction.

##Scope of Core Sector Reforms

The high-level panel is mandated to examine several fundamental areas of the banking industry. Key topics slated for review include the necessary mergers of public sector banks (PSBs). The committee will also look into expanding bond markets specifically for corporate financing needs across the economy.

Another major focus area involves granting greater autonomy to private bank management structures. Furthermore, the panel is expected to look at raising Foreign Direct Investment (FDI) limits within the banking sphere. A draft roadmap regarding bank mergers has already been prepared and will be reviewed by the committee.

##Addressing Governance and Market Dynamics

Beyond operational structure, the committee's agenda extends significantly into governance and investment management. Topics such as board governance are under scrutiny, including defining the responsibilities of directors in modern banks. The panel will also examine capital and investment-related issues crucial for sector maturity.

A particular point of focus involves foreign investors’ voting rights. An official earlier stated that giving overseas lenders a higher voting right proportionate to their shareholding in Indian banks is expected to be a key agenda item for the high-level bank panel once constituted. This initiative aims to attract foreign capital and expand global footprints within India's financial landscape.

##Regulatory Technology and Level Playing Field

The discussion will also incorporate critical themes related to technology and digital infrastructure. The committee will review Digital Public Infrastructure, innovation, and technology utilization across banking services.

Advanced concepts like REGTECH (regulatory technology) and SUPTECH (supervisory technology) are expected to be part of the talks. Regulatory technology refers to the use of digital tools by banks for risk management and compliance automation. Conversely, supervisory technology involves tools used by regulators to improve oversight of financial institutions.

A separate focus area is the consolidation in the co-operative banking space. Sources indicate a need for closer attention on governance and operational efficiency within cooperative banking. There will also be discussions dedicated to establishing a more level playing field between Indian banks and foreign banks operating domestically.