The government plans to give Growth Capital to performing state-run banks as it looks to encourage credit disbursement for private investment.
An assessment is being carried out and adequate capital will be provided to performing state-run banks to push credit growth, a senior finance ministry official told ET.
“Banks have said they are aiming to achieve around 8% increase in their lending books, based on their size and operations,” said the official, who did not wish to be identified.
While the government has only budgeted Rs 20,000 crore for bank capital infusion till 2018-19, it is looking at all options to increase this amount. “Various options including capital bonds are being looked at to provide this extra support,” the official said.
According to the latest Reserve Bank of India data, gross lending by all commercial banks stood at more than Rs 69.45 lakh crore in July 2017, a growth of just 4.7% over the previous year.
Last week, finance minister Arun Jaitley had said at the 70th annual general meeting of Indian Banks’ Association that improving the lending capacity of banks and encouraging private sector investments are the two biggest challenges confronting India.
“We are looking at both consolidation and strengthening,” Jaitley had said, adding the government would rather have strong banks merging with strong banks than weak banks merging with weak banks.
A finance ministry official said that non-performing lenders will be further pushed to consolidate their business, increase recoveries and finally look for merger with other banks. The government has sought details from banks on their non-core assets and the other steps that they are taking to raise capital from the markets.