Jaitley pledges support to public sector banks

Finance Minister Arun Jaitley said that at a time when the private sector has been somewhat conservative in investments, public investment always takes the lead.

Welcoming RBI's easing of rules to allow lenders to bolster capital ratios, Finance Minister Arun Jaitley on Wednesday said the government will take all steps and provide resources to keep public sector banks in good health.

During his post-Budget interaction with the industry, he said banking is a stressed sector and so the government is professionalising PSU banks and recapitalising them.

"RBI last evening took a very positive move which helps further in recapitalisation of banks," he said.

Easing rules on what banks can count towards their core capital requirement under the upcoming Basel III rules, the Reserve Bank of India allowed reserves associated with property revaluations and foreign-currency translations to be considered as common equity tier I capital.

The move is likely to free up as much as Rs 3,50,000 crore (Rs 3.5 trillion) in capital of public sector banks, helping them boost buffers while complying with a deadline set to clean up their balance sheets.

"And therefore, whatever resources are required to keep PSU banks in good health, we are going to take that," Jaitley said. "We are also, after improving the health, going to look at possible consolidation and further reforms and while doing so, I have fiscal discipline to maintain."

The finance minister said that at a time when the private sector has been somewhat conservative in investments, public investment always takes the lead.

He emphasised on the need for creating a business environment for both global and domestic investments to move up while maintaining fiscal discipline.

Stating that maintaining fiscal discipline is extremely important, he said India cannot claim to be the fastest growing major economy in the world if it doesn't maintain its discipline.

"And therefore, it was extremely important for us under these circumstances to maintain the discipline," he said. "And I am quite sure, with all the steps we have taken and hopefully in the next financial year, which is politically not obstructive as the last one, we will be able to push through many more reforms."

These reforms can help beat the target of up to 7.75 per cent GDP growth projected in the Economic Survey, he said.