Privatisation of PSU banks is difficult because 51% of MPs won't support the requisite amendment of the Bank Nationalisation Act. While progress is hard, it would be useful to atleast not make things worse. Further equity infusions into PSU banks by the Ministry of Finance make things worse. As an example, MOF is about to put Rs.16,742 crore into SBI. They didn't need to do that.
Going beyond new money going into PSU banks is the issue of dividend payouts. The average dividend payout for 2006-07 of non-financial firms was 18%. PSU banks paid out 14%. I would argue that far from putting more money into PSU banks, what MOF needs to do is get the payout ratio of PSU banks up. Simultaneously, given the poor HR, risk management and corporate governance of PSU banks, capital requirements for them need to be higher.