Achieving a GDP growth of 8.5 per cent will remain a pipedream unless banks are well-capitalised, said Nirmal Gangwal, MD, Brescon Corporate Advisors (P) Ltd, a financial advisory firm.
Given the criticality of bank funding for the corporate sector in India and its implications for growth, Gangwal said the Government missed the opportunity to make a sizeable allocation for public sector banks in the last Budget. He said that 2-5 per cent of the tax collections of the Centre should have been set apart for this purpose.
Tax collections this fiscal are expected to be ₹11.58-lakh crore. If they grow at about 12 per cent per annum, this would yield sufficient amounts to recapitalise banks over the next four years, he said. Public sector banks need about ₹4.6-lakh crore as capital over the next four years to meet international capital adequacy standards under Basel-III. The Government is expected to fund around ₹2.4-lakh crore given its stake in public sector banks. Asked if the Government could raise more resources by bringing down its stake to even below 51 per cent in PSBs, Gangwal said that the country may still be 5-10 years away from that situation.
Sovereign ownership of banks provided great comfort to depositors and the ‘deposit culture’ may vanish if the Government’s stake comes down, he feared.