Government to push for consolidation of public sector banks

New Delhi: The government will push for consolidation of the public sector banks once they are recapitalised and strengthened, Finance Minister Arun Jaitley said on April 5.

"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 on April 5 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.  

Jaitley further said the government is trying to easen the business environment in the country. "We are trying to introduce fairness in the decision making process... we are trying to make sure that decision making is quick," the minister added. He said though the low oil prices have helped India, there are challenges created by global situation particularly in terms of shrinkage of exports.

He said global trade is shrinking, there is volatility and unpredictability and "frankly no body knows how long this will last". In such a situation, Jaitley said India really has to create firewalls around it to cushion the impact from global developments.

The finance minister further said in comparison to the rest of the world, India looks good but "compared to our own standards and our own potential, I think we can do much better". He, however added the challenges come from the agriculture sector in the wake of two continuous years of weak monsoons.

He expressed hope that this year, the monsoon rains will be good and the agriculture sector growth will pick up. The minister said last fiscal about three crore people were given loans under the MUDRA scheme. He said this fiscal, the target for the current fiscal will be "much higher" than the last year.