Banks to Get Rs 5 Lakh Crore Leeway Via Recap Plan
The finance ministry had unveiled a mega recapitalisation plan last month to improve PSBs' financial position as most of them are plagued by mounting bad loans.
Public sector banks (PSBs) will get an additional leeway of Rs 5 lakh crore because of the government's Rs 2.11 lakh crore recapitalisation plan coupled with the "ambitious reforms agenda", Finance Minister Arun Jaitley said today.
The finance ministry had unveiled a mega recapitalisation plan last month to improve PSBs' financial position as most of them are plagued by mounting bad loans. The PSBs are to raise Rs 80,000 crore by issuing bonds, which are part of the Rs 2.11 lakh crore package.
Presenting the Union Budget 2018-19, Jaitley said: "The recapitalised banks will now have a greater ability to support growth. The programme has been integrated with an ambitious reform agenda, under the rubric of an Enhanced Access and Service Excellence (EASE) programme.
"This recapitalisation will pave the way for the public sector banks to lend additional credit of Rs 5 lakh crore." Financial Services Secretary Rajiv Kumar said the fiscal consolidation road map is extremely essential.
"As the finance minister has mentioned, it is very well kept under glide path. Keeping that in mind its (capital infusion) through the bonds. So no cash outgo from next year.
"These are cash neutral. It does not have any bearing on the bond market," Kumar said. The government has also proposed to allow strong regional rural banks to raise capital from the market to enable them to increase credit to the rural economy.
"All these structural reforms in the medium and long run will help Indian economy achieve stronger growth for a long time," Jaitley said.