With reference to the governance of ‘public sector banking in India, consider the following statements: [2018]

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

Capital infusion into public sector banks by the Government of India has steadily increased in the last decade.
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

Explanation

Statement 1 is incorrect

If we consider 2007-2017 data, capital infusion into public sector banks by the Government of India has not steadily increased. The government infuses capital into PSU banks to support credit expansion and help them tide over losses arising from provisions for non-performing assets (NPAs).

Line graph comparing total net profit/loss (PAT) and capital infusion into PSBs by GOI from fiscal years 2007-08 to 2016-17, with values in Rs. Crore. Net profit peaks around 2012-13 and sharply drops to a loss in 2015-16, while capital infusion shows a general upward trend, peaking in 2014-15 before declining.

Statement 2 is correct

Five associates and the Bharatiya Mahila Bank became part of the State Bank of India (SBI) in April 2017. Bank of Bikaner and Jaipur (SBBJ), State Bank of Hyderabad (SBH), State Bank of Mysore (SBM), State Bank of Patiala (SBP) and State Bank of Travancore (SBT), besides Bharatiya Mahila Bank (BMB), merged with SBI.

PMF Concept Hack

Statements mentioning steady trends over a decade are risky unless you are sure of the data. Capital infusion by the Government of India into public sector banks has not increased steadily; it has varied year-to-year, so Statement 1 can be easily eliminated. Statement 2 refers to a specific banking reform—the merger of associate banks with the State Bank of India—which is a known step taken to strengthen the public sector banks.

Answer: (b) 2 only; Difficulty Level: Hard

2018, PYQs