Recapitalisation for PSU banks to be performance-linked: Shaktikanta

‘Q3 economic growth negates negative speculation about note ban impact’

NEW DELHI: Asserting that adequate capital will be made available for state-owned banks, Economic Affairs Secretary Shaktikanta Das on Tuesday said every amount of tax payers’ money given would be linked to their performance. Acknowledging non-performing assets of banks as one of the challenges for the economy, he said, “the easier solution people have been talking about the problem of balance sheet of the banks, the problem of NPA is to provide more capital, inject more capital into the banks.”

As on September 30, 2016 gross NPAS of public sector banks rose to Rs 6,30,323 crore as against Rs 5,50,346 crore by June end. This represents an increase of Rs 79,977 crore on quarter on quarter basis. To clean up balance sheet, the government has announced plans to recapitalise the PSU banks. Das wondered, “Are we going to inject simply more capital and encourage inefficiency or are we going to link up capital infusion with improvement in efficiency, with resolution of stressed asset.”

The government has already announced fund infusion of Rs 22,915 crore, out of the Rs 25,000 crore earmarked for 13 PSBS for the current fiscal. Of this, 75 per cent has already been released to them. The first tranche was announced in July with the objective of enhancing their lending operations and enabling them to raise more money from the market.

“I think every amount of tax payers’ money that goes into the bank will have to be performance linked. That is precisely what the government is doing,” he said at the launch of the OECD Economic Survey here. “While it continues to be on recapitalisation that need to be capitalised, the emphasis is perhaps more on linking it to performances, linking it to outcomes of the efforts taken by the banks,” he said.

Under Indradhanush roadmap announced last year, the government will infuse Rs 70,000 crore in state-owned banks over four years, while they will have to raise further Rs 1.1 lakh crore from the markets to meet their capital requirement in line with global risk norms Basel-iii.

In line with the blueprint, Rs 25,000 crore earmarked for the PSBS in each fiscal, 2015-16 and 2016-17. Besides, Rs 10,000 crore each would be infused in 2017-18 and 2018-19. In the Budget 2017-18 speech on February 1, Finance Minister Arun Jaitley announced capital infusion of Rs 10,000 crore for the next fiscal beginning April 1.

Elated at the GDP numbers, the Finance Ministry on Tuesday said the 7 per cent growth in the third quarter has negated the negative projections and speculations about the impact of demonetisation on growth. Economic Affairs Secretary Shaktikanta Das said the third quarter and the 7.1 per cent growth projected for full fiscal are “definitely something noteworthy”.

“We had said that most of the reports were anecdotal, not based on statistics. There were reports that manufacturing activities in many sectors were affected due to demonetisation but as we see from the numbers manufacturing growth at very 8.3 per cent is very satisfying number and promising number,” Das told reporters here.

The process of remonetisation has progressed well and was completed today, he said, adding there is no complaint of cash shortage from banks. Some complaints of shortage are coming from ATMS, that is being handled by RBI, Department of Financial Services and individual banks by providing notes, he said.

“The overestimation that was done about the so called negative impact of demonetisation it is very satisfying to know that it is not there. Because we still remain 7 per cent plus growth country ... “The third quarter GDP numbers are out and as you have seen the numbers completely negate the kind of negative projections and speculations made about the impact of demonetisation,” Das said. He said the impact of demonetisation, coupled with GST and the series of reforms which the government has undertaken looks very promising. “The real estate sector has apparently not done so well.

It’s not a satisfactory number, we have to remember that the sector itself is going under a major structural reform. Going forward we should see improvements in the sector,” Das said. He said that the impact of demonetisation was temporary and was limited to consumption. Meanwhile, with the GDP growing by 7 per cent in the third quarter, India Inc said the economy is getting back on track yet reforms are needed to revive investments and push demand hit by note ban.

“Growth is expected to recover in the next financial year. The direction indicated in the Union Budget announced earlier this month is encouraging and will further strengthen the domestic economy. It is extremely critical to push the domestic capex cycle which has been persistently weak,” Ficci Secretary General A Didar Singh said.

“We also look forward to a further reduction in lending rates by the banks. This will help boost consumption and prop-up investments through low-cost finance,” he added.