Government making efforts to drive credit growth: Jaitley

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New Delhi, April 11 (IANS) Finance Minister Arun Jaitley on Tuesday said the government is taking various steps to drive credit growth and expansion of the economy, including recapitalisation of public sector banks.

“The government has carried out the exercise of capitalisation of Public Sector Banks (PSBs) to conform with regulatory capital norms as well as for driving credit growth to cater to the needs of a growing economy,” Jaitley told Rajya Sabha.

Jaitley said the assessment was that Rs 1.80 lakh crore capital needs to be infused in PSBs.

“As part of Indradhanush scheme, the government has decided to infuse Rs 70,000 crore from budgetary resources. The second tranche of capital, that is Rs 1.10 lakh crore would come from the central government policy that equity of public sector banks could be brought down, but certainly kept at a minimum level of 52 per cent,” Jaitley said.

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He said that “merely because some people in the industry don’t pay” doesn’t mean that “taxpayers should bear the burden of keeping the banks going”, which he said would happen if government infuses the entire capital.

“At an ideal situation when we are in a position of getting the best valuation of those (PSBs’) shares (government will reduce its equity), and that money could be used for infusing money so that the entire burden does not fall on the taxpayer,” Jaitley said.

The Finance Minister said the Indradhanush scheme – to revamp functioning of public sector banks — was not the last step towards recapitalistaion of PSBs.

“Government will fully support the public sector banks because they have a very important role to play. Indradhanush plan is not the last step as far as recapitalisation is concerned. Once the market conditions with regard to their valuation improves those shares of banks would be used for further recapitalistiuon of banks,” he said.

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He said that for resolution of stressed assets, RBI has introduced a number of tools such as Corporate Debt Restructuring (CDR), Strategic Debt Restructuring Scheme (SDR) and Scheme for Sustainable Debt of Stressed Assets (S4A).

“That resolution is being tried through various schemes and the government while improving the health of certain sectors — whose health was responsible for some of the NPAs being created — is making conscious efforts to see that this problem (of NPAs) is resolved,” Jaitley said.

He said the major problem about NPAs relates to “some big accounts which are 20-30 in number” and where “people should realise that banks need to be paid back”.

“If current promoters are not in a position to repay back then they have to develop alternate corporate strategies so that companies are able to pay back,” he said.

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He said that proceedings for recovery as well as criminal proceedings were being initiated against wilful defaulters, and clarified that not all non-performing assets (NPAs) were actually the result of wilful default.

–IANS

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