Bank recapitalisation will boost lending: Arun Jaitley

Finance Minister Arun Jaitley on Saturday said the government's move to recapitalise public sector banks (PSB) would improve their lending capacity.

"I think the indications are that it's (credit offtake) already happening and that seems to be good sign and now with the recapitalisation of the banks, the capacity itself to lend will improve," Jaitley told reporters.

He was addressing a press meet along with Reserve Bank of India Governor Urjit Patel.

The government's plans to spend Rs 2.11 lakh crore to recapitalise PSBs in a major step to restore the banking system's health.

"I had a meeting with the SEBI's (Securities and Exchange Board of India) board, and one of the factors that stood out in their presentation was that there is now also increased reliance on the bonds market as far as credit is concerned," the finance minister said.

Jaitley had a meeting with RBI and SEBI boards in the national capital on Saturday on the Union Budget.

Talking about the fiscal situation in the country, Jaitley said next year would be reasonably more comfortable as far as revenues are concerned.

"Therefore, I can't at this stage say that there would be any slippage. I am sure we will able to maintain the target quite well... You can't base it on a hypothetical situation like oil prices... What has happened in the last three days is again something which nobody had predicted. So, that's... entering into an area on which there is no certainty at the moment.," he added.

Brent crude oil price is hovering around $63 per barrel at present.

Adding to the oil price concern, Patel said: "If I can just add that, in fact, in the MPC (Monetary Policy Committee) resolution, we had put forth the downside risks or the mitigating factors. We had observed, that in recent days, oil prices had two-way movement... What the Finance Minister said is exactly the correct point that, we need to be prepared for movements either way."

"It is just very difficult to predict oil prices. A few months ago... June or so, people were talking about oil prices never going above $40-45... and some of the advice that came to the MPC and RBI was based on that which turned out to be wrong in a major way," Patel said.

--IANS

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