New Delhi | Jagran Business Desk: Finance Minister Nirmala Sitharaman on Monday said that the central government will setp up an asset reconstruction company or 'bad bank' in financial year 2021-22 to take care of non-performing assets (NPAs) of banks.

Presenting the Union Budget 2021, Sitharaman said that the Centre will also infuse Rs 20,000 crore into public sector banks (PSBs) to consolidate their "financial health".

The Finance Minister, who was presenting her third Budget, said that financial year 2021-22 capex is targetted at Rs 5.54 lakh crore, adding that the government will provide Rs 2 lakh crore to states and autonomous bodies for it.

Though the Centre has announced the formation of a bad bank, many experts feel that excess dependence on capital infusion for PSBs is not a good plan for long term.

"Banks are an important area which we need to correct. We are looking at various options including the option that you have mentioned, it is still in the works so let us wait a bit, let us wait for a slightly longer period for us to unveil," DEA Secretary Tarun Bajaj said earlier, as reported by DNA.

Meanwhile, the central government in financial year 2019-20 had proposed to make a Rs 70,000-crore capital infusion into the PSBs to boost credit for a strong impetus to the economy. It, however, refrained from committing any capital for the PSBs in the Budget 2020-21, hoping that the lenders will raise funds from the market depending on the requirements.

Later, in September 2020, Parliament approved Rs 20,000 crore capital infusion for PSBs as part of the first batch of Supplementary Demands for Grants for 2020-21.

Of this, the government provided Rs 5,500 crore to Punjab & Sind Bank in November 2020, to meet the regulatory capital requirement. In 2017-18, the government had infused Rs 90,000 crore, followed by Rs 1.06 lakh crore in 2018-19.

Posted By: Aalok Sensharma