Nirmala Sitharaman said the provision coverage ratio is now at its highest in seven years (File)
To strengthen financial health of public sector banks (PSBs), Finance Minister Nirmala Sitharaman Friday said the government will pump in Rs 70,000 crore to boost their lending capacity.
Unveiling the Union Budget 2019-20, she said non-performing assets of PSBs have come down by Rs 1 lakh crore.
Banks have recovered Rs 4 lakh crore due to the Insolvency and Bankruptcy Code and other means effected in the past four years, she said.
"Having addressed legacy issues, PSBs are now proposed to be further provided Rs 70,000 crore capital to boost credit for a strong impetus to the economy," she said.
The re-capitalisation would be done through the recap bonds as has been done in the past.
To further improve ease of living, the finance minister said banks will leverage technology, offering online personal loans and doorstep banking, and enabling customers of one PSB to access services across all state-owned banks.
"In addition, government will initiate steps to empower account holders to remedy the current situation in which they do not have control over deposit of cash by others in their accounts. Reforms will also be undertaken to strengthen governance in PSBs," she said.
She further said the provision coverage ratio is now at its highest in seven years, and domestic credit growth has risen to 13.8 per cent.
The government has smoothly carried out consolidation, reducing the number of PSBs by eight, she said.
Last year, the government announced its first three-way merger.
As part of this exercise, erstwhile Vijaya Bank and Dena Bank were merged with Bank of Baroda (BoB) effective April 1 to create the third-largest lender of the country.
Prior to the BoB merger, the government only had experience of State Bank of India which had merged five of its associate banks -- State Bank of Patiala, State Bank of Bikaner and Jaipur, State Bank of Mysore, State Bank of Travancore and State Bank of Hyderabad and also Bharatiya Mahila Bank effective April 2017.
At the same time, as many as six PSBs have been enabled to come out of the prompt corrective action framework, she added.