There were no rigid prescriptions suggesting that only small or large sized banks are good or bad, Mankad said adding the government should provide the right environment to improve the profitability in the banking sector. He was speaking at a national conference on financial sector reforms organised by CII in New Delhi on Tuesday.

Reacting to a CII suggestion that big banks and FIs should be allowed to merge, Mankad said competitiveness and profitability in the public sector banks would not necessarily depend on their sizes but would be governed by appropriate policies that are good for the economy and shareholders.

Answering a query on whether India could also consider mergers of banks like the one which took place in Japan recently, Mankad said the government could not hurry into any decision without considering various factors.

One of the most critical issues in thefinancial sector reforms relates to the extent of public ownership of banks and the special laws governing them, he said, adding it has been argued that state ownership adversely affects the capacity of even the willing banks to compete in the market place.

This is seen as one which inhibits efficiency and a disincentive to dynamic commercial performance because of the compulsion to operate within uniform rules and regulations, he added.

The issues of optimal efficiency, autonomy and ownership are interlinked and progress in the financial sector reforms depends to a significant extent on the resolution of legal and structural issues, he said.

Mankad said that the relevance of reviewing legal and structural issues needed to be underlined because without specific and well planned attention to them the reform process would be incomplete. "We live in a real world, where we face real problems and we have to find real solutions to them."

Pointing out that the nineties has seen a number of new policyinitiatives, the finance secretary said that the time has come to give more stress on the implementation aspect. "The impression that reform-related decisions do not get effectively translated into practice is too widespread to be disregarded", Mankad said.

He said the workforce deployed in the public sector banks or financial institutions were among the best and the conservative outlook amongst some of them could be attributed to the general environment prevailing in their place of work.