Date:12/11/2005 URL: http://www.thehindu.com/2005/11/12/stories/2005111207401500.htm

Business

FM stresses role of banking sector in GDP growth

Lend to SMEs and extend micro-credit in villages: Chidambaram

KOLKATA: The banking sector will have to raise Rs. 60,000 crore as additional capital in the next five years, Finance Minister, P. Chidambaram, said on Friday.

Inaugurating the two-day bankers' conference `Bancon 2005' here, Mr. Chidambaram said it was important to increase the capital base of the banks and urged the industry to gear up itself to raise Rs. 60,000 crore capital in the next five years. He said the issue would be discussed at the meeting of the bank CMDs convened on November 18.

Scope for raising capital

Banks, which do not have the scope to raise Tier-I capital, would have to go in for Tier-II capital, he said, adding that the additional capital could be raised by way of improved profitability, by better recovery or by raising from the market.

Stating that the contribution of the banking sector to gross domestic product (GDP) was low at 35 per cent, the Finance Minister said the sector should set the goal for raising the contribution to GDP to 50 per cent and it would be only possible by raising the size of the banks.

Mr. Chidambaram said for banks to raise their share to 50 per cent, bank credit had to grow at a much faster pace. He said the size of Indian banks was a limiting factor. — PTI