8% GDP growth rate possible, FM tells LS

CONDITIONS APPLY Says recapitalisation of PSU banks, revival of stalled projects will help, but implementing GST key

NEW DELHI: Finance minister Arun Jaitley on Wednesday said state-run banks will tap the market to raise ` 1.10 lakh crore in next few years, as the government has decided to infuse ` 70,000 crore towards their recapitalisation.

If my friends (Congress), who are not present in House today, allow implementation of GST, which was introduced by Congress, you will have an uniform tax rate...it is capable of boosting the economy by 1-2%

ARUN JAITLEY, finance minister

NEW DELHI: Finance minister Arun Jaitley on Wednesday said state-run banks will tap the market to raise ` 1.10 lakh crore in next few years, as the gover nment has decided to infuse ` 70,000 crore towards their recapitalisation.

As per the finance ministry’s calculations, ` 1,80,000 crore would be required by the government banks in the next three years, over and above the average profits they make.

Replying to a debate on Supplementary Demand for Grants in Lok Sabha, Jaitley said that the government will infuse ` 70,000 crore in publicsector banks by 2018 making them healthier to finance economic growth.

“In adverse situation we can touch 8% (GDP growth rate) if banks are recapitalised, GST implemented, stalled projects revived and infrastructure spending improves,” Jaitley told the house.

In the current financial year, ` 25,000 crore would be pumped into the banks, of which ` 10,000 crore would go to the top six banks including State Bank of India, Bank of Baroda, Bank of India, Punjab National Bank, Canara Bank and IDBI Bank.

“The increase in the allocation has been made as the fiscal situation of the country is looking comfortable and it was indicated earlier also that a larger sum would be sanctioned if things looked brighter,” a senior government official said.

Out of the remaining ` 15,000 crore, a sum of ` 10,000 crore will go to the lenders that need financial support while the remaining ` 5,000 crore would be infused into those banks which show healthy improvement in performance. Meanwhile, the government has also asked banks to identify non-core assets which could be either hived off or monetised to garner capital.

Bad loans of public sector banks stood at 5.2% of total advances in March 2015 compared to 4.72% in March 2014

Several banks saw a drop in profits in the first quarter ended June 30 due to higher provisioning for bad loans.