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Finance Minister Arun Jaitley Sunday said the government has decided to inject more capital in state-owned banks to strengthen the banking system and spur economic growth.
Last month, the government had unveiled a staggering Rs 2.11 lakh crore two-year road map to bolster NPA-hit public sector banks, which includes recapitalisation bonds, budgetary support and equity dilution.
Addressing heads of state-owned banks at 'PSB Manthan' in Gurgaon, Jaitley said the government has decided to put in more capital from the Budget, through bonds and banks' equity expansion and "therefore, it is the country, which is virtually going to pay to keep the banking system in good health".
The finance minister assured the bankers who gathered here that "you won't find us interfering" in commercial transactions, but "when the system is making all these changes and all these monetary contributions in order to strengthen the banking system, we want robust public sector banking system so that your ability to support growth itself increases".
He further said one of the focus areas banks have taken up is to support MSMEs because the sector creating jobs and giving boost to the economy has no access to international finance or bond market.
Jaitley told the bankers that the government is spending a lot of public money and foreign investment is coming in.
"...we need the third engine also to fire and a robust private sector, MSME sector so that optimum growth rate which we have the potential for can be reached," he said.
Non-performing assets of PSBs have increased to Rs 7.33 lakh crore as of June 2017, from Rs 2.78 lakh crore in March 2015.
In the last three-and-a-half years, the government pumped in more than Rs 51,000 crore capital in public sector banks.