Calling public sector banks an “article of faith”, the Finance Ministry on Wednesday reassured depositors that their money in these banks is safe and no state-owned bank would fail. The government’s commitment to maintaining the health of these banks is “firm and unequivocal”, said Rajeev Kumar, the secretary of Department of Financial Services.
The ministry was addressing the media to lay out a roadmap for its Rs 2.11-lakh-crore recapitalisation plan to revive public sector banks.
Finance Minister Arun Jaitley said the government wants to build an “institutional mechanism” to ensure that problems that his government inherited do not recur. Jaitley detailed two aspects of the recapitalisation plan, one on which banks would be chosen for recapitalisation and another about the steps to ensure that the banks follow the best standards.
The Centre announced the capital it was allocating for 20 public sector banks, including a Rs 8,800-crore fund infusion for State Bank of India and Rs 5,473 crore for Punjab National Bank.
In October, the government had announced a Rs 2.11-lakh-crore “unprecedented” recapitalisation plan over two years to support the struggling public sector banks. Of the total amount, the Centre aimed to provide Rs 18,139 crore directly through its budget, Rs 1.35 lakh crore through selling bonds, and the rest by selling government stake in the market.
Indian state-owned banks have been grappling with stressed assets for the past few years. This has affected their profits as they have often had to write off defaulted loans.