The government is looking to encourage its employees to invest part of their salary recommended by the seventh pay commission in a fund which will further be used for the recapitalisation of the state-owned banks, according to Zee Media reports.
Lucrative incentives like tax break or higher return could be offered to rope in high-income government officials to invest in the fund, according to officials.
Higher income government employee may be asked to shell out 50% of their increased salary towards the capitalisation of bonds, as per the proposal.
Top officials of the finance ministry had preliminary discussion over the issue last week, officials said. However, no decision has been taken yet, they said, adding that Committee of Secretaries is looking into the matter and various alternatives are being considered.
According to the report, this proposal is being considered to look for more resources for recapitalisation of public sector banks which are suffering with gross non-performing assets (NPAs) of Rs 3.61 trillion.
In the Budget 2016 proposal, the government provided Rs 70,000 crore for the implementation of Seventh Pay Commission for 47 lakh government employees and 52 lakh pensioners.
In total, implementation of the pay commission is to cost the government Rs.1.02 lakh crore.