The government will soon announce a series of major banking reforms, including lowering its stake in state-owned banks to 51 per cent, Union Finance Minister Arun Jaitley said on Sunday.
“Public sector banks have played an important role in financial inclusion but at the same time, political government needs to maintain arm’s-length distance from these banks and allow them to have more professionalised bank boards. The banks will have to work on banking considerations,” said Jaitley at the CNN Asia Business Forum in Mumbai.
The Indian Express had highlighted in a series of reports how PSU banks had written off Rs 1.14 lakh crore over the last three years, and how a spike in loan write-offs and bad loans over the last two quarters prompted corrective action from the government and RBI.
In the quarter to December 2015 alone, nine state-owned banks have reported a combined loss of Rs 11,251 crore, with Bank of Baroda posting a quarterly net loss of Rs 3,342 crore on Saturday.
Apart from banking reforms, Jaitley also said that the government is trying to bring in more clarity on tax norms and resolve tax issues to give a “stable and predictable” tax regime.
“A lot has happened in the past that has given us a bad reputation. Unreasonable tax demands can never bring you revenue. We are, one by one, getting rid of all legacy issues. And I am glad to say that from retrospective taxation fears to some exaggerated demands, most of those fears have been addressed. Two problems still remain. We are trying to solve them,” said Jaitley.
The Finance Minister also said that the government is committed to bringing down direct corporate tax rates over the next four years. “As far as the in-direct tax is concerned, we do hope to negotiate GST in the days to come,” said Jaitley.
He said that the government is diverting the windfall from falling oil prices to infrastructure, railways and rural roads. “As far as development of demand is concerned we have seen that rural demand is lagging behind and we intend to strengthen rural infrastructure using the windfall,” said Jaitley, adding that the government will channelise savings in social sector and other developmental activities.