Govt eyes investor money to prop up faltering state-run banks

Finance minister Arun Jaitley has hinted at big banking reforms, including major divestment of government stake, to improve the financial conditions of state-run lenders. The government has already committed to bringing down its holding up to 51 per cent, he said.

Jaitley, however, ruled out privatisation of these banks, saying the economy has not reached a stage where the government can completely exit its holding in the 27 public sector banks.

Jaitley is expected to announce major banking reforms in the forthcoming budget even as he assured foreign investors that retrospective taxation will be a thing of the past.

''We have two tax disputes with large corporates. This we are working to settle amicably,'' he said while speaking at the Asia Business Forum 2016 as part of 'Make in India' week in Mumbai on Sunday.

He said legacy issues in the tax system will be sorted out.

The government, Jaitley said, would maintain an arm's length in the functioning of banks but will not divest completely from public sector banks.

''The country has not reached a stage where the government can completely exit its holding in the 27 public sector banks,'' he said. To professionalise the operations of state-run banks, which control over 70 per cent of the industry, he said.

On the passage of the goods and services tax in the Rajya Sabha, Jaitley said he hoped to ''negotiate through'' in the coming days.

He said while the government could not push ahead with the divestment programme because of the choppy markets, the windfall gains from declining oil prices have been put to use for creating infrastructure.

However, he said, there is a need to focus on investing in rural roads, electrification and irrigation to push up rural demand, which has been hit by two successive droughts.

Jaitley also asked states to reconsider the issue of higher taxes in the tourism sector, saying that the centre has offered visa-on-arrival facility to 125 countries and this has already resulted in a quantum jump of foreign visitors.