As an aside, let me add that the importance of a sufficiently large kitty of official reserves to deal with sudden flow reversals has been underscored time and again. In fact, the large reserves that many emerging market economies have built up post Asian-crisis is often viewed as a bulwark against contagion effects of global crises and risk aversion.
As regards the public sector banks, their role has been extensively debated over the years. The idea of banking consolidation was first pitched in the Narsimham Committee1 through establishment of a three-tier banking structure: i) three large banks with international presence, ii) eight-to-ten national banks, and iii) large number of regional and local banks.