Finance Minister Arun Jaitley on Tuesday (Oct 24) announced a Rs 2.11 lakh crore recapitalisation plan for public sector banks.
Of this, Jaitley said 1.35 lakh crore will come from the issue of recapitalisation bonds. The remainder will be from market and budgetary support. He said,
“Today, in the ministers' meeting it was decided that there should be bold step taken on recpaitalisation of banks. In that accord, we intend to put Rs 2,11,000 crore in this recapitalisation activity.”
The recapitalisation plan will be accompanied by more banking reforms, which will be announced over a period of time, according to the finance minister.
The move is aimed at improving the lending capacity of banks, especially to the MSME sector, which will be treated as one of the crucial areas for lending and will help boost employment generation.
Jaitley also said,
“The resources (for lending) are available, however, the capital adequacy of banks has been eroded due to the high NPAs (Non-Performing Assets).”
A report by ETMarkets said the banking sector is grappling with asset worries. The latest available data suggests some 39 listed banks had amassed Rs 8.35 lakh crore worth of non-performing assets.
In a series of tweets, Jaitley also said,
News reports quoted State Bank of India Chairman Rajnish Kumar welcoming the recapitalisation announcement by the government. He said the move will go a long way in bringing private investment back to the economy.
Other announcements at the press conference included the development of 34,000 km of roads at an investment of Rs 5.35 lakh crore under the Bharatmala project (a name given to the ambitious road and highways project of Modi Government).