With reference to the governance of lsquo public sector banking in India consider the following stat...........

Economic and Social Issues Rural Banking and financial institutions

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

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Explanation:

The government has been infusing large amount in seven public sector banks (PSBs) through recapitalisation bonds but this has not been steady as the statement 1 says. Therefore it is incorrect.

The merger of SBI associated banks under Section 35 of the State Bank of India Act, 1955 will result in the creation of a stronger merged entity. This will minimize vulnerability to any geographic concentration risks faced by subsidiary banks. It will create improved operational efficiency and economies of scale. It will also result in improved risk management and unified treasury operations. Statement 2 is correct.