The government is examining various options including that of setting up a bad bank to help in improving the asset profile of public sector banks and enable credit growth in the economy. Other measures including recapitalisation of the state-owned banks is likely in the medium term, Department of Economic Affairs (DEA) Secretary Tarun Bajaj said Friday.
He said the government would continue with momentum on reforms which began right after the pandemic and the upcoming Budget will reflect that emphasis on economic reforms.
“We are looking at various options, including the option (of bad bank). It’s still in the works, so let’s wait for a slightly longer period for us to unveil … the Reserve Bank of India has been asking us and we ourselves also feel that we need to recapitalise. We have recapitalised to a large extent and this year also we have kept some money for recapitalisation. So that commitment is there,” Bajaj said, addressing via video a conference organised by the Confederation of Indian Industry (CII).
He said the economic recovery is better than expected, which has also led to a pick up in government tax collections. This would help the government in improving its spending, especially capital expenditure to boost economic activity. “All in all we are hoping that the economy should be back on track. We are hoping for a robust growth next year, also on a low base effect,” Bajaj said.
The economy shrank for the second straight quarter in September, recording a 7.5 per cent contraction in GDP, compared to the unprecedented 23.9 per cent year-on-year contraction in April-June.
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