A day after government announced a massive Rs 2.11 lakh crore capital support initiative, Chief Economic Adviser Arvind Subramanian today made a case for consolidation in the banking space saying the country ideally should have 5-7 large lenders. In an ideal banking world of tomorrow, India needs to have both large public sector and private sector banks, competing domestically and being competitive internationally, he said in a lecture at SGTB Khalsa College here. Yesterday, Finance Minister Arun Jaitley unveiled an unprecedented Rs 2.11 lakh crore two-year road map to bolster NPA-hit public sector banks, which includes re-capitalisation bonds, budgetary support, and equity dilution. Recapitalisation bonds are likely to impose an interest burden of about Rs 9,000 crore annually on the government, though they will not have any inflationary implications for the economy, Chief Economic Adviser Arvind Subramanian said today. "First, the true fiscal cost of issuing the Rs 1.35 lakh crore recapitalisation bonds is the interest payment of about Rs 8,000-9,000 crore.

Source: dna October 25, 2017 15:46 UTC