“Banks are today less burdened because books are cleaner,” the finance minister said. “As a result they will able to go and raise money from markets. I have absolute self-interest in pressing this particular aspect because I would think burden on government to recapitalize you will be far lesser.”
Sitharaman said the country will need four or five large lenders such as the State Bank of India to meet the challenges of economy and industry.
The Centre will guarantee $4.2 billion of security receipts issued by its new bad bank, in a fresh attempt to clean up one of the world’s biggest piles of bad loans, she said earlier. The National Asset Reconstruction Company Ltd., to be owned by government-run and private sector lenders, will hold stressed assets which can be sold on to investors at a reduced price.
“No business can happen without borrowing and I am sure you understand better than I understand,” Sitharaman said.
Sitharaman said many districts in the country lack banking presence despite high level of economic activity taking place in those areas, nudging lenders to augment efforts of deepening presence.
Giving the lenders the option to decide which place requires banking presence through a brick-and-mortar model and where a step-down presence would help, Sitharaman made it clear that she is not against digitalisation and efforts.
The finance minister also said the upcoming National Asset Reconstruction Company should not be called a “bad bank” as it is called in the US.
Banks need to be nimble and understand every unit’s need to achieve the USD 400 billion exports target, she said.
