Approves Rs 2.11 lakh crore recapitalisation package for PSU banks

Approves Rs 2.11 lakh crore recapitalisation package for PSU banks

Approves Rs 2.11 lakh crore recapitalisation package for PSU banks

The government's decision to infuse Rs 2.11 lakh crore in public sector banks and spend Rs 14 lakh crore on infrastructure projects has received the thumbs up from India Inc.

"The NPAs of government banks have increased to Rs 4.55 lakh crore between 2015 and 2017", he said. If only the Narendra Modi government had moved on this front three years ago.

Facing criticism over the declining economic growth in India, finance minister Arun Jaitley on Tuesday came up with a mega recapitalisation plan for the public sector banks (PSBs).

Apart from fund-infusion, Jaitley also said that the government's plans to introduce banking reforms that will ensure that there is no rolling over of bad loans for years as happened in the period between 2008 and 2014. Purists may balk at the fact that it is financial engineering-but they must remember that we live in a time in which central banks have bent rules by even buying corporate bonds to fix economies.

Asked if the bank recapitalization plan will impact the fiscal deficit, he said: "It will depend on the nature of bonds and the manner in which it is dealt with".

Commenting on the development, State Bank of India Chairman Rajnish Kumar said in a statement: "This milestone announcement on recapitalising banks in one go is a bold and courageous move and the need of the hour".

Surjewala said decisions like noteban and "poor" implementation of GST hurt the core of macro and micro economic fundamentals, and expressed concern over growing NPAs of public sector banks.

"There are strong macroeconomic fundamentals", Finance Minister Arun Jaitley said while addressing a media conference.

The total revenue of GST paid under different heads upto October 23, 2017 for the month of September 2017 is Rs 92,150 crore. Jaitley said he was hopeful of private investment rising on the back of the measures unveiled so far and spending on infrastructure. However, any amount of money promised to banks through bond issuance, will have to be added to the government borrowings as per the Indian accounting standards.

He has faced criticisms after a surprise scrapping of high-value bank notes last November and a new goods and services tax effected earlier this year disrupted businesses across the country.

- Effective and targeted government spending is the main priority of government. On fiscal deficit, he said the government is committed to sticking to the target of 3.2 per cent of GDP for the current fiscal but a review would be done in December.

Chandrajit Banerjee, Director General, CII, said: "The government has imparted a huge boost to bank recapitalisation... which is likely to kickstart the credit cycle and facilitate private investments..."

In addition to repairing their balance sheets, the banks need billions of dollars in new capital to meet global Basel III banking rules, due to fully kick in by March 2019.

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