New Delhi, Oct 24: Union Finance Minister Arun Jaitley on Tuesday announced unprecedented PSU banks recapitalisation program of Rs 2.11 lakh crore, out of which Rs. 1.35 lakh crore will come from recap bonds, while Rs 76,000 crore will come from markets and budgetary support. This is being seen as a major bid to boost flagging economic growth and increase bank credit flow.
"To improve the lending capacity of the banks, we have announced the recapitalization programme, which is essential to increase public spending on infrastructure, and that expenditure on infrastructure," said Finance Minister Arun Jaitley at a conference here.
Jaitley clearly indicated that the recap bonds will not add to fiscal deficit, indicating that the bonds may be issued by the RBI.
Bank recapitalisation is likely to increase private investments in the economy as the banks will have more money to lend to corporates. This in turn, the government feels, will create more jobs. The government is facing flak for slowing of economy and rising unemployment.
Adding to this he said that there is a need to increase public investment for which bold steps by the government will be taken to recapitalise banks in the country.
However, speaking about the current economic situation, Jaitley said that India has remained as the world's fastest growing economy for the past three years, thus maintaining very strong economic fundamentals with progressive growth story.
There are strong macroeconomic fundamentals," Finance Minister Arun Jaitley said while addressing a media conference.
"We will report on the situation as they develop. A lot of internal meetings on the state of economy internally within the ministry were held. Discussions were also held with the prime minister. But India has remained one of the fastest growing economies in the world," said Jaitley.
"When results of the GDP of the first quarter came out then I had said that we will be ready for the response," said Jaitley while adding that there have been a lot of discussions and reviews of the economy in the past few weeks within the ministry.
Adding to this, Jaitley said that government has decided on the steps needed to sustain the growth momentum.