New Delhi : Finance Minister Arun Jaitley favoured consolidation of public sectors banks, which will see capital infusion of Rs 25,000 crore next fiscal, once their balance sheets are strengthened.

“The first and immediate agenda is to strengthen the banks. We will strengthen them by recapitalising the banks…,” he said at post Budget interaction with media here.

“And thereafter we are willing to look at consolidation among subsidiaries, consolidation of subsidiaries with the principal bank, consolidation of a weak bank to a strong bank subject to overall 52 per cent discipline that we have laid down for ourselves,” he said.

However, with regard to IDBI Bank the government intends to lower its stake to even below 50 per cent. Government currently holds 80.16 per cent in IDBI Bank.

“The reference to bring down to below 50 per cent was with regard to IDBI Bank,” he said.

The Bank Board Bureau created yesterday will be operationalised during 2016-17 and a roadmap for consolidation of Public Sector Banks will be spelt out.

On recapitalisation of state-owned banks, the Finance Minister said, the government is open to providing more capital than that announced in the Budget. The proposal is to infuse Rs 25,000 crore in public sector banks in the next fiscal.

“What I have announced today is not the last word or last amount as far as recapitalisation is concerned. Therefore, something more will happen,” he said.

“The banks are putting in special efforts to effect recoveries, with a focus on reviving stalled projects.

To support the Banks in these efforts as well as to support credit growth, I have proposed an allocation of Rs 25,000 crore in BE 2016-17 towards recapitalisation of PSBs,” he said in the Budget speech.

If additional capital is required by these Banks, he said, the government will find the resources for doing so. “We stand solidly behind these banks,” he added.

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Bankruptcy code coming for finance sector, SARFAESI Act to be amended

New Delhi:  Declaring financial sector reforms as being one of the “nine pillars” of Budget 2016-17, Finance Minister Arun Jaitley on Monday said a comprehensive bankruptcy code will be enacted and legislation brought in to deal with illicit deposit taking schemes.

“This Code will provide a specialised resolution mechanism to deal with bankruptcy situations in banks, insurance companies and financial sector entities. This Code, together with the Insolvency and Bankruptcy Code 2015, when enacted, will provide a comprehensive resolution mechanism for our economy,” he added.

The draft bill has proposed a timeline of 180 days, extendable by another 90 days, to resolve cases of bankruptcy.  A major proposal in the budget to tackle the problem of stressed assets in the banking sector concerns the Asset Reconstruction Companies (ARCs).

Jaitley proposed “to make necessary amendments in the SARFAESI Act 2002, to enable the sponsor of an ARC to hold up to 10% stake in the ARC and permit non-instituional investors to invest in Securitsation Receipts.”

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