Budget 2016: Secys confident of bank consolidation, achieving divestment tgt

The Union Budget 2016 presented today had two areas that analysts had a bone to pick with: the continuation of the bank recapitalization target at Rs 25,000 crore and the lofty aim of divesting government stakes Rs 56,000 crore.In an exclusive CNBC-TV18 interview, Shereen Bhan put up the market's doubts to the officials who matter: Financial Services Secretary Anjuly Chib Duggal and Disinvestment Secretary Neeraj Gupta.Duggal maintained the Finance Minister's line that the government will up the recapitalization figure if need be.To a question whether the government could push for more consolidation in the banking space, she said she expects consolidation to happen by itself as the sector was undergoing a change -- with the advent on new banks and banking models.While Gupta said he was confident of achieving the government's target of divestment, including about Rs 20,000 crore of strategic stake sales. "The NITI Aayog has come out with a framework. The targets are fixed. We have scope. Only 44 of 235 central public sector enterprises (CPSEs) are listed.Below is the verbatim transcript of the interview.. Q: Because the big hope in the market was that the bank recap outlay will be much higher than Rs 25,000 crore. The expectation was Rs 30,000-35,000 crore. The Finance Minister has articulated and caveated several times over that we will give additional funds as and when the need arises. It also hinges I am told by the minister of state for finance on the government's plan as far as consolidation of public sector banks (PSBs) is concerned. This is not the first time we have tried to go down that road on consolidation of PSBs again fought with many challenges. So, what can be the realistic expectation now as far as the judicial outlay for recap is concerned?

Chib: That is question with answer and I agree with you. It is out there in public domain, it is as required, one. B, about consolidation you said what is different this time. It is the banking space which is different. We do have licenses out for 21 payment and small finance banks. We have two new universal bank. We have a commitment from Reserve Bank of India (RBI) for licenses on tap. If the banking space is going to change so much there is going to be a certain amount of a shake down and realignment within that space. So, that is what is different this time.

Q: So, how soon do we move towards this process of consolidation. I know the banks bureau has only been recently set up. In fact it is barely a day and half old. Mr Rai is going to be chairing that. But what can we expect now in terms of the next milestone in this journey?

Chib: It would be precipitate on my part to set a specific milestone because really any consolidation or merger - when I say a consolidation or a merger I mean specific consolidation or merger - has to arise out of a need, an assessment etc. So, as those assessments get made we should be moving ahead but I would at this point of time not like to make any commitment about a very specific timeline.

Q: The previous target was almost Rs 70,000 crore. It has finally been scaled down to Rs 25,000 crore in FY16. You now perhaps have a little more realistic target of Rs 56,000 crore. Mr Watal just told me every time I come here and you ask me whether you will meet your targets or not I come back and smile because I always do. The disinvestment secretary so far haven't had much luck on that front. I am hoping that you will break that jinx. But really as far as disinvestment is concerned 20,000 for strategic sales and the balance 36,000 is what you are going to push significantly. You believe that this is a realistic target?