Govt announces mega Rs 2.11 lakh crore bank recapitalisation and Rs 7 lakh crore road plan

The Centre on Thursday announced a massive boost for the banking sector by approving a Rs 2.11 lakh crore bank recap plan for the ailing sector, which includes Rs 1.35 lakh crore via bank recap bonds and Rs 76,000 crore from budgetary support and market loans.

This will certainly cheer up the banking sector, which is grappling with asset worries. Latest available data suggest some 39 listed banks had amassed Rs 8.35 lakh crore worth of non-performing assets.

Among key important decisions to revive the economy, government also announced mega Rs 7 lakh crore road building project to develop more than 83,000 km of roads.

Recognising the need for boost to economy Finance Minister Arun Jaitley said: "Government has conducted an extensive economic survey. We have had detailed consultation with Prime Minister on the state of the economy. We have decided on the steps needed to sustain the growth momentum."

Finance Minister Arun Jaitley said the recapitalisation of state banks would be followed by a series of reforms. He did not give details.

Here are the highlights of key decisions taken today:

1. A mega road building programme. Under this programme government will construct 83,000 km highways with an investment of nearly Rs 7 lakh crore in the next 5 years. This will generate 14.2 crore man-days by 2022.

2. Bharatmala project will be the umbrella project under which the mega road development work will be undertaken. Under this, government will develop 34,000 km of roads with an investment of Rs 5.35 lakh crore.

3. Government also announced massive Rs 2 lakh 11 thousand crore bank recapitalisation plan.

4. Highlighting the need to strengthening bank government said it's time to create stronger banks to catalyse stalled private investment in the country.

5. Rajiv Kumar, Financial services secretary, said that the government will position banks for take off in the economy.

6. Under a 'realistic recognition' of banks NPA situation, Rajiv Kumar said that the NPAs jumped from 36% in the March 2014 to 82% in June 2017.

7. The banking sector is grappling with asset worries. Latest available data suggest some 39 listed banks had amassed Rs 8.35 lakh crore worth of non-performing assets. State-run banks such as IDBI Bank, IOB, UCO Bank, Bank of Maharashtra, Central Bank, Dena Bank, Union Bank and Corporation Bank had gross NPAs in excess of 15 per cent of gross advances as per their latest disclosures.