The government will dilute its stake in state-run banks to 52% once the health of the lenders improve and the money will be used to inject capital in them, Finance Minister Arun Jaitley said on Monday.
He hoped for a resolution to the burgeoning bad loan problem following the government empowering the Reserve Bank of India (RBI) to order lenders initiate insolvency proceedings against defaulters and create committees to advise banks on recovering non-performing loans.
“We already have a programme under which we have been supporting recapitalisation of banks. Where more funds are required from the government, we will be quite willing to look at that,” he said.
“But once the health of the banks themselves improve, we have also announced that the government will be willing to bring down its own equity in the banks to 52% and that can be used for banks’ recapitalisation,” he said at a CII-Kotak investor roundtable here.
This fiscal, the government has budgeted Rs 10,000 crore of capital infusion in public sector banks.
The amount is lower than Rs 25,000 crore set aside in the previous budget but will be insufficient to help state-run banks raise about Rs 80,000 crore of equity capital that they will require over the next two years to comply with the Basel III norms and support credit growth.
Jaitley said the non-performing assets (NPA) problem is limited to “a certain set of accounts and these numerically are not very large in number but the quantums are high and therefore, they impact the balance sheet of banks”.
GST scheduled for July 1 rollout
The Goods and Services Tax (GST) is on schedule for implementation from July 1 and will not lead to any significant increase in prices of goods although cost of some services may see a marginal hike, Finance Minister Arun Jaitley said on Monday. Hailed as the biggest tax reform since India's independence, GST will replace an array of central and state levies with a national sales tax, thereby creating a single market and making it easier to do business in the country.
“The current indirect tax structure in India is fairly complicated...those who transacted in either goods or services would have to deal with multiple authorities. The whole country was divided into multiple markets. So a free movement of goods and services was not possible. Now, the idea of GST was that let there be just one tax in the country,” he said.
Deccan Herald is on WhatsApp Channels| Join now for Breaking News & Editor's Picks