Finance minister Arun Jaitley on Saturday said greens hoots of an economic recovery are visible and asked stressed public sector banks (PSBs) to get their act together and get back to shape at the earliest, so that they can support growth through improved lending. The Central Statistics Organisation on Friday forecast that the country’s growth could drop to a four-year low of 6.5% in the current financial year. However, it projected the gross domestic product (GDP) to rise to 7% in the second half of this financial year, against 6% in the first half when the impact of structural changes like the Goods and Services Tax (GST) and demonetisation had weighed on growth. Exhorting PSBs to rebound from the current stress, the finance minister said the taxpayers and the government are doing their bit to keep them in good shape and that’s why a massive Rs 2.11 lakh crore package was announced for capital infusion into them. This unprecedented move in late October has driven up credit growth, Jaitley said. “The taxpayers are making a sacrifice to keep the banks in good health…. In the next few years, your performance is on test. I am sure the banks will come out of the transient challenges stronger,” Jaitley said here at the Platinum jubilee celebration of UCO Bank.
Around a half of PSBs are already under prompt corrective action by the Reserve Bank of India (RBI). Earlier this week, the government sought Parliamentary approval to issue the recapitalisation bonds of Rs 80,000 crore this financial year. As per the plan, of the total recapitalisation package of Rs 2.11 lakh crore over two years through FY19, the government will infuse as much as Rs 1.35 lakh crore through such bonds. Commenting on economic growth, Jaitley said India is growing at a reasonable pace and that it’s probably the only large economy to have dared to effect major structural changes even when the global economy was going through turbulent times.
“Those structural changes can create a transient hiatus in an economy and possibly short-term challenges. As soon as those challenges get over, the growth curve starts moving up. And we can see the green shoots….” Financial services secretary Rajeev Kumar expressed confidence that the stressed PSBs will turn the corner at the earliest.