The Rs 2.11 lakh crore recapitalisation package for public sector banks announced by the Finance Minister Arun Jaitley on Tuesday is an investment by the government and not an expenditure, Finance Secretary Ashok Lavasa told CNBC-TV18 on Friday.
Of the total, Rs 1.35 lakh crore will be given by issuing recapitalisation bonds, while the rest will come in the form of budgetary support and capital raising by the banks themselves. The nature of the recapitalisation bonds is still being deliberated over and will be made clear once finalised.
Speaking about the recapitalisation exercise, Lavasa said that the government is open to considering models that have been tried before and doesn’t want to dismiss any suggestions right away. The recapitalisation program is a work in progress, he said, and a final plan will be formulated in due course.
The recapitalisation plan announced by the government is the largest one undertaken in India till date and the headline number of Rs 2.11 lakh crore was received very well by both markets and banks themselves. In a report published on Thursday, State Bank of India said that the funds will go a long way in battling non-performing assets, something that public sector banks in particular have been struggling with for quite some time now.
Lavasa said that it is essential to disclose the recapitalisation exercise methodology once it is finalised and that it should be done in a fair and square manner. He added that the current government wants to be transparent in all its actions and that the impact of the recapitalisation bonds on the debt market will be disclosed before the securities are issued.
“This money which government will invest should not have any impact on government’s other developments and schemes that are ongoing,” said Lavasa, adding that this is the overarching framework within which work will be done.