Recession is returning, Mukherjee says

Mumbai: Finance Minister Pranab Mukherjee said yesterday that India's future challenge was to maintain the momentum of growth against the background of deteriorating global growth rates, sovereign debt crisis in Europe, the possibility of systemic impact of crisis in international financial markets and some domestic constraints.

"Sufficient cushion is available with banks to absorb the enhancement in the equity and Tier I capital requirements as per Basel III global banking regulations. The Government of India is committed to ensure the requisite level of capitalisation of Public Sector Banks (PSBs)," Mukherjee said, while inaugurating the 6th International Conference on Banking and Finance.

Mukherjee said the federal government had infused more than Rs200 billion (Dh14 billion) in 2010-11 and Rs120 billion in 2011-12 in various PSBs in order to maintain a minimum Tier-I Capital to Risk Weighted Assets Ratio (CRAR) at 8 per cent and also to increase the Government of India holding in PSBs.

Fallout

Maintaining that no country was immune to the contagion from the fallout of global financial crisis, Mukherjee said: "In the past three years, since the global financial crisis, we have seen how the financial security of individuals and the stability of the financial systems across countries were compromised by the cross border integration of systems and the resulting economic slowdown".

According to Mukherjee, there was recession in the developed world, which appears to be resurfacing after a brief spell of recovery and weakening of short-term growth prospects in the developing and emerging economies.

The minister said that in the post-crisis period, financial stability had become an integral part of policy discussions and macroeconomic objectives globally. "A sound and resilient banking sector, well-functioning financial markets, robust liquidity management and payment and settlement infrastructure are the pre-requisites for financial stability," he said.

Mukherjee expressed satisfaction that the Government of India had achieved the 2011-12 target of providing banking facilities to people in 73,000 villages having population in excess of 2000 in February 2012, a month before the end of the financial year.

"With this, over 25.49 million beneficiary accounts would have been operationalised. I have now decided to extend the "Swabhimaan" campaign to habitations with population of more than 1,000 in the north eastern and hilly state, in the Union Budget 2012-13," the minister said.

The sixth International Conference on Banking and Finance was organised by the Indian Merchants' Chamber in association with the Institute of Chartered Accountants of India.