Finance Minister Arun Jaitley said on Sunday that the government has decided to inject more capital into state-owned banks to strengthen the banking system and spur economic growth.

Last month, the government had unveiled a ₹2.11 lakh crore two-year roadmap to bolster public sector banks hit by non-performing assets (NPAs), which includes recapitalisation bonds, budgetary support and equity dilution.

Addressing heads of state-owned banks at the ‘PSB Manthan’ here, Jaitley said the government has decided to put in more capital from the Budget, through bonds and banks’ equity expansion and “therefore, it is the country which is virtually going to pay to keep the banking system in good health.”

“You won’t find us interfering” in commercial transactions, but “when the system is making all these changes and all these monetary contributions in order to strengthen the banking system, we want a robust public sector banking system so that your ability to support growth itself increases,” the Finance Minister told the bankers.

MSME support

He further said one of the focus areas banks have taken up is to support MSMEs (micro, small and medium enterprises) because the sector, creating jobs and giving a boost to the economy, has no access to international finance or the bond market.

Jaitley told the bankers that the government is spending a lot of public money and foreign investment is coming in. “...We need the third engine also to fire and a robust private sector, MSME sector, so that the optimum growth rate, which we have the potential for, can be reached,” he said.

NPAs of PSBs had increased to ₹7.33-lakh crore as of June 2017 from ₹2.78-lakh crore in March 2015. In the last three-and-a-half years, the government has pumped in more than ₹51,000-crore of capital into PSBs.