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Govt to push for consolidation of public sector banks

Tuesday, Apr 5, 2016,13:40 IST By Metrovaartha A A A

New Delhi | The government will push for consolidation of the public sector banks once they are recapitalised and strengthened, Finance Minister Arun Jaitley said today.

We have now undertaken this exercise of recapitalisation of banks within the existing resources. I am trying to find additional resources for that purpose… strengthen the banks. Once they are strengthened, I am going for consolidation of some of the banks, he said at a event organised by IFC here.

In his Budget speech, Jaitley had announced that the government will unveil a roadmap for consolidation of public sector banks (PSBs) which are expected to get an infusion of Rs 25,000 crore this fiscal. He had also announced if additional capital is required by these banks, the government will find the resources for doing so.

Earlier, the government had announced a revamp plan ‘Indradhanush’ to infuse Rs 70,000 crore in state-owned banks over four years, while they will have to raise a further Rs 1.1 lakh crore from markets to meet their capital requirements in line with global risk norms Basel-III. In line with the blueprint, PSU banks were given Rs 25,000 crore in the last fiscal and an equal amount is planned for the current fiscal.

As per the plan, Rs 10,000 crore each would be infused in 2017-18 and 2018-19. Replying to a question regarding manufacturing and ‘Make In India’ at the IFC event, Jaitley said interest rates must become more competitive so that high cost of capital does not add to cost. He said Reserve Bank has done well in the last one and a half years to gradually follow a particular direction.

Our basic economic parameters are in order for that direction to continue… so that growth rates are being maintained, CAD is at acceptable levels, inflation is moderately under control, foreign exchange reserves are high. And I think with majority government and decisive leadership decision making is not difficult, the Finance Minister said.

RBI today lowered the key policy rate by 25 basis points. The central bank has cut the rate by 150 basis points since the beginning of the rate easing cycle in January 2015.