Recapitalisation of PSU banks is on high priority: Arun Jaitley

Jul 19 2014, 15:56 IST
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Arun Jaitley says capital would be raised by the banks without diluting public sector characteristics in them. Arun Jaitley says capital would be raised by the banks without diluting public sector characteristics in them.
SummaryPublic sector banks need recapitalisation to the tune of Rs 2.4 lakh crore to meet Basel III norms.

Finance Minister Arun Jaitley today said that recapitalization to the tune of Rs 2.4 lakh crore in public sector banks to meet Basel III norms is a 'high priority' item for the government.

"We suggested proposal for recapitalising of public sector banks over the next four years...the government is also treating this as a very high priority item," he said at an event organised by Canara Bank here.

He said the capital would be raised by the banks without diluting public sector characteristics in them. So, the government stake in the banks would remain over 51 per cent.

"While the government will have majority stake, we will allow the public to invest directly in these banks," he said, adding this will help banks to expand and thereby increase the whole process of financial inclusion.

This programme has to be rapidly expanded so that the remaining 42 per cent of financially excluded population is brought into the banking system.

At present, 58 per cent of the population has bank account.

Jaitley in the Budget speech had said, "Financial stability is the foundation of rapid recovery. Our banking system needs to be further strengthened. To be in line with Basel-III norms, there is a requirement to infuse Rs 2,40,000 crore as equity by 2018 in our banks. To meet this huge capital requirement, we need to raise additional resources to fulfil this obligation."

While maintaining the public ownership, the capital of these banks will be raised by increasing the public shareholdings in a phased manner through sale of shares largely via retail to common citizens of this country, he had said.

"Thus, while the government will continue to have majority shareholding, the citizens of India will also get direct shareholding in these banks, which currently they hold indirectly. We will also examine the proposal to give greater autonomy to the banks while making them accountable," he had said.

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