Mission Indradhanush to infuse capital in banks not the last step: Jaitley

Govt supports public sector banks because they have very important role to play, says Arun Jaitley

Mission Indradhanush to infuse capital in public sector banks is not the last step as far as their recapitalisation is concerned, Union Finance Minister Arun Jaitley said on Tuesday, asserting the government was fully supporting them.

Replying to questions on concerns by Opposition over growing non-performing loans (NPLs) in these banks, he said the government was making all efforts to ensure the health of the banking sector improves and the banks are repaid.

He said the NPL problem related to some big accounts, which are not unduly large in numerical terms, and people have to realise that banks have to be paid back.

"There are 20 to 30 large accounts where people have to realise that banks have to be repaid. If the current promoters are not in a position to repay, then they have to develop alternate corporate strategies so the companies pay back," he said.

"The Indradhanush plan, which envisions Rs 70,000 crore being given from the central Budget, is not the last step as far as recapitalisation is concerned," he said.

Jaitley said the assessment was that the public sector banks would require about Rs 1.8 lakh crore of capital to be infused in them.

"As part of the Indradhanush scheme, the government, from the budgetary resources, had decided to infuse Rs 70,000 crore.

"This means Rs 25,000 crore each in the first two years and Rs 10,000 crore this year and another Rs 10,000 crore the next year. The Rs 70,000 crore is to be infused in a phased period of time from the budget," he said.

Jaitley, however, noted that the problem of NPAs was due to some people not paying up the banks for the loans taken and the burden comes on to the taxpayer.

"As far as the action plan is concerned, several actions have been taken. These include empowering the banks by statutory changes, all laws have been amended and the Reserve Bank has come out with various schemes from time to time.

"There are some other steps which are now being contemplated," he added.

Jaitley said the government believes the public sector banks have a very important role to play in supporting a large number of social programmes and extending the reach of banking and supporting infrastructure in the country.

He said once the market conditions with regard to the valuation of these banks improves, then the bank shares itself will be used for their further capitalisation.

He also noted that banks as lenders and creditors have to act in larger public interest and ensure that the economy and growth itself is supported, he said, adding that whatever arrangement with loans are made, these have to be on a commercial basis.

In his written reply, Jaitley said, "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 Stressed Assets (S4A)".

He also said "the government has carried out the exercise of capitalisation of public sector banks to conform with regulatory capital norms as well as for driving credit growth to cater to the needs of a growing economy." Earlier, Minister of State for Finance Santosh Gangwar said the new S4A scheme of RBI was launched in July 2016 and its results will come soon. "It is a new scheme and will bear good results," he added.