Reforms in Public Sector Banking

Response to the Draft Circular on the Lead Bank Scheme Key Policy Proposals The Reserve Bank of India issued a Press Release on 13 February 2026 inviting public comments on the Draft Circular for the Lead Bank Scheme (LBS). While the LBS has long supported rural and institutional banking, the current State Level Bankers’ Committees (SLBCs) require a fundamental overhaul, as they no longer fully meet operational or structural needs. Given the breadth and complexity of the scheme, a structured response must address public sector banking reform, rural credit, SME financing, governance frameworks, and long-term capital markets. This blog consolidates public comments, including proposals from the paper “Reforms in Public Sector Banking.” 1. Transform the Central Bank of India into a Government-Owned Wholesale Bank The Central Bank of India should be delisted and all public shareholders bought out so it becomes a fully government-owned enterprise. The bank would focus on wholesale banking, serve State Governments and institutions, and divest SME advances to SIDBI, with SIDBI restructured as Bharath Laghu Udyog Bank. 2. Reorganise Rural Banking through NABARD and Grameen Banks Rural branches of public sector banks could be handed over to NABARD and other state-owned banks. About 120 branches would remain to support agricultural knowledge and rural development. Grameen Banks would be strengthened through Central Bank equity participation and improved coordination. 3. Develop a ₹9 Lakh Crore Long-Term Bond Market Grameen banks and development institutions could issue long-term bonds in GIFT City, attracting domestic and international investors. Bonds would fund agriculture, rural development, and infrastructure, while allowing farmers and local stakeholders to hold structured financial instruments for alternative income streams. Committee on Banking Reform The Government of India has announced the creation of a high-level committee to examine banking reforms. It should be chaired initially by a former Cabinet Secretary for at least nine months, with sufficient resources to guide policy. Over time, the committee could evolve into a permanent framework for prosperity-building within the Department of Banking Operations of the RBI. Its primary focus should be commercial banking reform, ensuring that public sector banks effectively serve institutional and rural needs. Governance and Institutional Structure Effective governance is key to institutional reform: – Appoint a retired officer of Secretary or Cabinet Secretary rank as Chairman Emeritus for two years. – Appoint a serving officer of Secretary rank as Chairman for three years to manage central and state relations. – Boards should include professionals from central, state, and national sectors, with four Additional Chief Secretaries from State Governments. – Four Managing Directors and five Executive Directors would execute government mandates in wholesale banking. Farmers’ Financial Participation and Agricultural Growth Structured financial mechanisms like Farmers’ and “Friends of Farmers” Funds could ensure that farmers hold up to ₹10 lakh crore in bonds and other instruments. These measures, coupled with strengthened rural banking, could support India’s agriculture in producing an additional 40 million metric tonnes of crops over 20–30 years, meeting both immediate and medium-term needs. Skill Development and Institutional Capacity Institutional capacity can be strengthened through: – Collaboration between RBI and AICTE to manage select engineering campuses for commercial banking skill development. – Recruitment by India Post to develop a nationwide banking and currency management cadre. – Absorption of experienced personnel by commercial banks for specialised roles in governance, fraud prevention, and rural banking operations. The overarching goal is professionalism, integrity, and long-term institutional sustainability. SME Recovery and State Financial Corporations State Financial Corporations (SFCs) could play a central role in restructuring and recovering SME accounts: – Debt Recovery Tribunal (DRT) accounts may be transferred to SFCs for structured recovery. – Collaboration with the Supreme Court of India and High Courts ensures integration into regular judicial frameworks. – Interest charges on recovery accounts could be suspended to facilitate SME restructuring. Conclusion The Draft Circular on the Lead Bank Scheme offers a chance to rethink India’s banking architecture. Reforms in public sector banks, rural financial institutions, bond markets, governance frameworks, and institutional capacity are critical to strengthen financial stability and support long-term economic growth. Ultimately, successful financial reform must rest on integrity, professionalism, and robust institutional structures. Credit will follow integrity.

An Action Plan for the LGBTQ Community

Introduction It is a good augury that the Head of the Civil Services is leading a Committee to generate alternatives, as requested by the Supreme Court of India. The Government of India needs to have an action plan for the LGBTQ community. The following are some points for consideration in developing a practical action plan. Registration, Identification and Institutional Responsibility A proposed action plan for the Government of India to promote dignity, housing, employment, economic integration and access to services for the LGBTQ community, while developing rural and semi-urban The Government of India – Cabinet will decide on a registration process, and the agency for handling this will be the IRCTC (Indian Railway Catering & Tourism Corporation), as it has the capacity for capturing all the data and identification. This shall be supported by an annual budget of ₹300 crores, limited to the next 3 years, as a confidential internal portal for the Government of India to handle it. For the purposes of identification, the Government of India will take sole responsibility. The registration process will be under a portal which will be shared with all State Governments and their agencies, so that they can take cognizance. a. To identify every case, individuals can register in a simple format, consistent with the dignity of the individual prescribed in the Preamble of the Constitution, which the Government of India recognizes. In the case of gays, whether female or male, the elimination of social discrimination they face will be a gradual process that will take time. b. The Government of India shall appoint BSNL as a corporate agency to generate alternatives. c. The support will come from the Ministry of Social Justice. d. The Government of India can provide an initial grant of ₹5,000 crores, not for expenditure but for capital investment in quality homes where transgenders can live. This can be with property rights on a lease-cum-sale basis. e. The ideal place for this is fresh land to be identified between National Highways and Railway Stations. f. The State Governments can be requested to speedily make available pockets of land, which need not be very large in number but should be connected to a railway station. As railway stations have access to city-sides, village-sides and countrysides, the areas particularly connecting to National Highways in suburban, rural and other parts can be developed into suburbia, with opportunities that can help decongest cities as well. 700 such pockets can be identified, with pieces of land converted into row houses, mini houses or apartments, as preferred by the community. This would demonstrate integration, not isolation. Recommendations for a National Population Commission The Government of India will initiate an Indian Population Commission with due process and parliamentary and legislative approvals. The Indian Postal Service shall be expanded to the Indian Population Service, with an annual intake of 40 officers. The Union Public Service Commission will be requested to initiate the process from applicants for the services already made in the last 5 years and create a new curriculum and process for appointments by January 1, 2025. The cadre shall be called the Indian Population and Census Service. Thirty existing members from the services will be drawn to form the Indian Population Commission, which shall be headed by a service-rank official of the rank of Secretary, Government of India. Retired or any gazetted officer of the Indian Union from the last 20 years, up to the age of 70, pensioners and serving personnel who wish to volunteer for this assignment of the Indian Population Commission will be empanelled and registered with BSNL. The mission is to register every Indian into the Indian Population Register in a simple format, expandable from all the databases in the nation. In the medium term (5 years), all LGBTQ individuals will be provided with housing at costs built by the community, rendering them acceptable. They will be given plots at cost with an instalment plan of 30 years. Employment and earning opportunities will be provided not only to them but to any member of the community willing to work hard or smart and contribute to nation-building. This programme will be entirely borne by the Central Government with its own resources. To this extent, the MGNREGA programme will be withdrawn effective from the financial year 2025, and 50% of the current year’s allocation will be made towards building assets on Central Government property to meet the needs of social justice. Development Objectives: Rural Areas, Ecology and Enterprise The following objectives will prevail: a. Rural development Development in rural areas, particularly the sections between any National Highway connecting to any railway station. b. Ecology and biodiversity The ecology will ensure that at least 50% of the area will be for ecology and biodiversity, preserving and maintaining existing green spaces. This will be developed by the community within the region, making it hospitable for people anywhere in India who are living on rent to build their own homes. The plans will be conducive to building homes with provisions for renting accommodation to any member of the community in India who chooses to migrate to such locations. c. Enterprise parks and employment Enterprise parks will be located next to these areas, encouraging enterprises to start or relocate from congested cities, meeting State and national employment creation objectives, with a minimum earning wage of ₹400 for 4 hours of productive work, particularly adding value to our agriculture and agribusinesses. The sole objective of this exercise is to bring all kinds of waste in the current agricultural ecology to zero. This includes the complete mobilization of national resources in animal husbandry, poultry and any related activity, including the husbandry of stray animals, especially those from crowded cities. Eventually, the balance between rural, semi-urban and urban needs to be harmonious, and to this extent, members of the LGBTQ community will contribute to the national endeavour. Currency Management, Banking and Employment Generation In the first instance, the Reserve Bank of India or its agency needs to join the process in the registration for developing them into agents of change. The Reserve Bank of India is directed to ensure that no currency is spoiled or mutilated, with handling done entirely by this community at special locations of at least 900 facilities, manned by temporary employees from this community for 4 hours a day. The Reserve Bank of India shall invest in the security of this operation, supported by the community and the especially nominated agency, which will be the Grameen Banks. The Grameen Banks will be directed to have currency chests next to railway stations. Currency movement will always be on railway platforms in specially designed coaches attached to all passenger and express trains. All circulating coins will be managed through this mechanism. The Ministry of Economic Affairs will handle the distribution of currencies from the currency press and mints solely to the Indian Postal Bank and the Grameen Banks. The Reserve Bank of India and the Government of India will ensure that freshly minted coins and currency are managed and issued from 1,800 railway platforms of India, drawn by commercial banks and the Indian Postal Banks at all their counters across the country. The Government of India shall draw on the resources of retired BSNL personnel or voluntary service to develop standard operating procedures and systems, ensuring the smooth flow of currency. All land belonging to the Department of Communication shall be handed over on a 30-year lease to the Department of Railways. Railway Centres and Infrastructure The Department of Railways shall convert these centres into: Currency chests: For circulation within respective communities. Organizing towers: To capture satellite or telephony signals, enabling employment generation through indirect services for 12 hours a day, in 4-hour shifts. Employment and initial training: Any person desiring employment will be provided with 2 hours of training and 2 hours of initial work, expandable to 4 hours. Such persons can leave their jobs for higher-value employment or self-employment once this process is started. Initial employment phase: In the initial phase, 240,000 women aged 18 to 24 will get open employment for 4 hours, along with scholarships to learn and earn in the next 4 hours. This experience-based approach will bring dignity and employment to any woman from age 18 for the rest of their lives, enabling services to the Indian community. Electricity charging points: The next phase involves setting up electricity charging points for two-wheelers, manned by this community every 10 kilometers in areas not utilized by proper sanitary landfills, legitimized through State Government agencies. Rural distribution: The Indian Railways can participate in this programme by tapping rural areas for coins, currency availability and basic essentials, legitimized through a formal takeover mechanism. Bharat Canteen Stores and Public Health The Ministry of Defence can be encouraged to establish Bharat Canteen Stores, not as ration shops but as 5/11 stores, providing processed food or equivalent from 5:00 AM to 11:00 PM, with nearby hygiene and sanitation facilities. This programme will integrate the National Health Programme. AIIMS, ESI Hospitals and Railway Hospitals can be modernized and expanded, providing the Queer Committee with medical access insured by national insurers. Every railway station will have a micro-hospital at the connection between the civil and State sides, with paid toilets, demonstrating the capability of railway stations to handle flux at any national agency for productive and employment growth. This initiative can create 2 crore jobs, generating 800 crore hours of productivity daily, making services more accessible. A National Mission to Eliminate Waste and Improve Productivity The famous term, “Waste is an activity that does not produce results,” will be transformed into a system with no additional waste of time for accessing services, translating into achievements over 10 years. The Government of India must adopt a catalytic rather than a control approach in building the economy to world standards by 2035. Marriage, Housing and Social Integration The Committee needs to recommend that the denial of married status to any same-gender couple is not feasible for at least 10 years under current circumstances. Special permission should be granted under the Marriage Act to permit “living together.” Single-occupancy housing is feasible for all transgender individuals or equivalents, with rental payments on social contributions or CSR equivalents on Central Government-managed properties, in cooperation with all State Governments. Voter registration will be supported by the Central Election Commission, with normal or extended facilities granted. Conclusion The Indian nation can accept all citizens, and integration will be a matter of time. The action plan envisages dignity, housing, employment, access to public services, economic participation and the development of rural and semi-urban India. Its central objective is to enable members of the LGBTQ community to contribute to nation-building while ensuring that integration, rather than isolation, guides the process. Sent to the Cabinet Secretary on 8th June 2024