Bank recap needs review: CEA

The banking recapitalisation programme needs to be reviewed, a top government official said here on Monday.

"The amount of money that government commited for recapilatlisation, I think we have to review it," Arvind Subramanian, Chief Economic Advisor, Government of India said.

He said that the amount committed by the government was with the view that banks will raise the part of the money by themselves.

"But then bank stocks having been battered, that is going to be very difficult," he said at a discussion organised by Bangalore International Centre (BIC), which was moderated by Infosys Chairman Nandan Nilekani.

Finance Ministry in November 2017, had committed Rs 2.11 lakh crore for the recapitalisation of the public sector banks (PSBs), which roughly have a 70% share of the assets of Indian banking industry, consisting of 21 public sector banks, 26 private sector banks, 43 foreign banks and 56 regional rural banks.

Of the total funds allocated, Rs 1.35 lakh crore was expected to come from the sale of recapitalisation bonds and the remaining Rs 76,000 crore will be through budgetary allocation and fund-raising from the markets.

Earlier this year, six PSBs saw infusion of Rs 7,677 crore as part of the recapitalisation move.

Subramanian also pitched for the privatisation of government banks, with focus on strong regulations.

Despite the banking sector reeling under the stress, he said that recent decision of the government to raise money from markets would not have much impact on the banking sector and bond yield.

On Goods and Services Tax, he said that the government is committed to bring petrol under the purview of the new regime.

The government had excluded petrol and alcohol from the GST regime, as they are the highest revenue generating products for the state and central governments.