Union Finance Minister Arun Jaitley on Thursday sent a strong message to private companies by saying that private debtors have to pay their dues to banks to avoid someone else taking control of their businesses.
"I think let's try and make the private sector pay for their debts or allow somebody else to step in," Business Standard quoted Jaitley as saying.
Earlier in May, the government passed the new bankruptcy law, under which the central bank can initiate insolvency proceedings against private companies who fail to repay the debt.
In June, the Reserve Bank of India (RBI) initiated insolvency proceedings against 12 large corporate defaulters, which accounted for Rs 2 lakh crore, almost one-fourth the country's bad loans.
Speaking at the Economist Summit, the finance minister said, "Through the bankruptcy law, I think this is the first time that debtors in India are being taken to task."
The government puts in more capital in public sector banks to shore up their books. The government, he said, has already put in Rs 70,000 crore in banks as capital and is "open" to putting in more money.
Jaitley said the government was open to providing more capital to banks but cleaning up stressed loans would be a bigger priority. Putting in more money at a later stage is a possibility, he added.
The finance minister also said that the government is an advance stage of consolidating the public sector undertakings (PSUs). "We don't need so many public sector banks. We need fewer, but stronger banks," he said.
Although the government announced in the 2017 Budget that it would pump in Rs 10,000 crore into PSU banks by way of capital this fiscal, many economist and bankers believe that the amount is too inadequate.
To facilitate fast-track approvals and consolidation among public sector banks (PSBs) the Union cabinet said last week that an alternative mechanism would be put in place in place shortly.
On interest rates, Jaitley said every finance minister wants interest rates to go down. "That's been constantly the desire of everyone. But then, at the end of the day, the regime and the system we have is that the finance ministry or North Block does not have the last word in this. Therefore, we will live with the regime that we have," Business Standard quoted the finance minister as saying.
