State of the economy: Is Rs 2.1 lakh cr funding plan last big opportunity to save banks?

Will the Rs 9 lakh crore fiscal stimulus announced by the Narendra Modi government save the sagging Indian economy? Particularly for the crisis-ridden banking sector, the Rs 2.11 lakh crore capital infusion that the government is probably the biggest-ever such package that could work wonders for the sector if followed up with proper structural reforms, said Jayanta K Sinha, former chief general manager at State Bank of India, told Firstpost in an interview.

This is the second in a series of interviews Firstpost is conducting as part of the ‘State of the economy’ dialogues. “This is the last big opportunity to save the banking sector,” said Sinha.

State of the economy: Is Rs 2.1 lakh cr funding plan last big opportunity to save banks?

Reuters

According to Sinha, state-run banks are in urgent need of structural reforms to bring in efficiency and accountability. The current pile of bad loans was accumulated over years of careless lending, vulnerability of state-run lenders to political-corporate nexus and wrong government policies, Sinha said, adding it will take time to repair this damage.

It is important that the government keeps an arm’s length with state-run banks to give them a free hand in business operations. “This situation has actually worsened,” Sinha said, adding he doesn’t believe all is bad in the economy. “India continues to have strong core fundamentals, which along with the ongoing structural reforms will take the economy to high growth trajectory ahead. But the immediate issues in the economy needs to be addressed,” Sinha said, particularly highlighting the problem of unemployment and plight of small and medium companies.

Watch the entire interview below:

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Updated Date: Jan 11, 2018 19:38:31 IST