Minister of State for Finance Jayant Sinha has denied the possibility of government diluting its stake in public sector banks at current valuations, which have been distressed. However, he underscored that his government would chose to do so only once it manages to push up the price to book multiples of these banks and bring them at par with private sector banks. It is recently that the government decided to reduce its stake in PSBs to 52%.
The public sector banks continue to witness stressed valuations on account of rising bad loans, which have become a major concern for the Reserve Bank and the government. The gross NPAs of PSU banks stand at Rs 260,531 crore as on December, 2014.
Of the total loans that have turned bad, loans of top 30 defaulters sum up-to Rs 95,122 crore, which is more than one-third of the entire non-performing assets of public sector banks as on December 2014, while most of the restructure loans belong to corporate sector.
Further, the minister also underlined the need to raise the tax-GDP ratio from 15% to 20-25%. He highlighted that the country’s tax-to-GDP ratio was the lowest among BRICS and OECD countries, further highlighting the banking perspective, if GDP size is to double, the size of the banking sector has to grow by 4-5 times.
In order to alleviate poverty, Sinha said, the country has to develop a new model to achieve growth rate of 7-8% over the next 10 years, which could then move the economy will move from the $2 trillion economy to $4-5 trillion economy.
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