Jaitley pointed out to the audience that a loss or profit by the private airlines was not payable for by the tax paid by the citizens of India, but the debt of Air India will have to be made good from government finance. He said the Air India disinvestment along with other strategic ones will free up a lot of government finance to be invested in other more rewarding sectors.
Speaking about the bad debt run up by the state-owned banks of over Rs 6 lakh crore, the minister said their resolution was one of the biggest challenges for this government. He said the government has not only cleared an ordinance that gave the RBI more role to solve the most difficult ones, but more was in the offing. “We also want to bring down the number of public sector banks. One segment of that has already happened with the State Bank of India merging all its associate banks under it. We are also looking to create a few more strong brands instead of a string of weak banks”. According to him in the present banking environment of several types of banks ranging from universal to payments banks, it made no sense to carry the weak state-run banks as independent entities.
While he did not mention it by name, one of those, IDBI Bank has been downgraded by Icra, Crisil and Moody’s last week citing dip in its capital and asset quality. The rating of the bank, despite sovereign support, now stands at BBB- which is just one notch above junk.
The minister said work on the merger of some of these banks could become public within the current financial year. In April, RBI Governor Urjit Patel too has said “It is not clear that we need so many public sector banks. The system could be better off if they are consolidated into fewer but healthier banks,” in his address at the Kotak Family Distinguished Lecture at Columbia University in USA.