PSU bank capital infusion plan gets thumbs-up from IMF

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Stressing that India will have to reform continuously to accelerate growth, the International Monetary Fund (IMF) today welcomed the government announcement to up the recapitalisation of state-run banks as a “positive”.

“We have a long view that more resources are needed for recapitalisation and from that sense, the plans put out is a positive step,” said Andreas Bauer, senior resident representative for the Fund, at an event here.

Stating that there is no dearth of reform agenda needed, he said a series of reforms is needed to achieve the 8 percent GDP growth aspiration.

“Reforms is not a series of 100 metre dashes, it is a marathon, a continuous process,” he said, speaking at a specially organised event on Indian growth at the NSE here.
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“India needs to get more traction on structural reforms and I don’t think there is not too much of (paucity) in terms of new ideas needed. The ideas are there, in sight.”

He said no single reform can help the country and pointed out broadening of the GST net to include realty and electricity, and labour reforms as other essentials.

Earlier in the day, the finance ministry announced a plan under which it spelled out a Rs 2.1 lakh crore recapitalisation agenda for the 20-odd state run lenders which control over 70 percent of the system.

Apart from helping the NPA-saddled lenders meet stricter capitalisation norms, the additional capital will also help increase credit supply to the economy witnessing sagging growth.

Career central banker and former Reserve Bank Deputy Governor H R Khan also welcomed the government announcement.

“It is a positive move. It should have happened earlier. But then it has to be accompanied by other measures in terms of governance, managerial reforms in PSU banks. Risk appetite has to increase and fear factor has to go,” Khan told reporters here.