Saturday, 25 November, 2017

Govt has a 2-lakh-crore bank capitalisation plan to spur economy

FinMin Jaitley says, strong banks need of the hour New highways, job creation part of govt plan to push India on high-growth track
Lillian Steele | 25 October, 2017, 00:58

Government announces public sector banks' capitalisation plan of Rs 2,11,000 crore, of which Rs 1.35 lakh crore will come from recap bonds and Rs 76,000 crore from budgetary support and market-raising.

"The NPAs of government banks have increased to Rs 4.55 lakh crore between 2015 and 2017", he said.

Besides bank recapitalisation, the Union Cabinet, at a meeting chaired by Prime Minister Narendra Modi, also approved the ambitious BharatMala Project that entails an expenditure of almost Rs 7 lakh crore to build 83,677 kms of roads over the next five years.

Union Finance Minister Arun Jaitley addressed a press briefing on Tuesday to detail state of the economy. "We have decided on the steps needed to sustain the growth momentum", the Finance Minister said. The government may look at mid-term growth plans via higher public spending, the report said.

Chief Economic Adviser Arvind Subramanian today said the interest burden of Rs 1.35 lakh crore recapitalisation bonds on the government would be about Rs 9,000 crore but this cost can be offset by spur in economic activities due to increased credit and private investment.

The record injection may lead to a rise in the nation's fiscal deficit, which could impact bond yields, said Anjali Verma, economist at PhillipCapital in Mumbai.

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".

Jaitley said the recapitalization of public sector banks would be followed by a series of reforms.

Under the Indradhanush roadmap introduced in 2015, the government had announced to infuse Rs 70,000 crore in state-run banks over four years to meet their capital requirement in line with global risk norms, known as Basel-III. The glide path of the fiscal deficit will continue to be maintained, says Arun Jaitley.

It was not immediately clear what the impact will be on the country's fiscal deficit, which Jaitley aims to keep at 3.2 percent of GDP for the current fiscal year to March and at 3 percent in the next financial year.

Effective and targeted government spending is the main priority of the government. The Ministry further notified that the total GST revenue is Rs. 14,042 crore, SGST revenue is Rs 21,172 crore and IGST revenue is Rs 48,948 crore.

"There have been lot of discussions and reviews of the economy in the past few weeks within the ministry".

The Finance Minister said the banks would get Rs 18,000 crore under the Indradhanush plan.

NC Saxena, former member secretary of the erstwhile Planning Commission? said that the banking sector is just part of the problem. "And job creation is the intention to push private sector investment and MSME funding", he said. So far, we believed that public sector banks have done indiscriminate lending at one stake.

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