Government Employee May Be Asked To Invest Part Of 7th Pay Commission Hike In Bonds

New Delhi: Government is looking at a scheme for encouraging its employees to invest part of their seventh pay commission salary hike in a fund which would be used for recapitalization of state-owned banks.

As per the proposal, higher income government staff from the rank of section officer may be asked to shell out 50 percent of increased salary towards bank capitalization bonds, officials said. Top officials of the finance ministry had preliminary discussion over the issue last week, the officials added. However, no decision has been taken yet, they said, adding that Committee of Secretaries is looking into the matter and various alternatives are being considered.

This proposal is being considered to find more resources for recapitalization of public sector banks which are saddled with gross Non-Performing Assets (NPAs) of Rs 3.61 trillion at the end of December 2015, as against Rs 39,859 crore in the private sector.

While the Budget did not provide an explicit overall provision number, the government had said the seventh Pay Commission hike has been built in as interim allocation for different ministries and Budget numbers were credible.

Last year, the government had announced a revamp plan ‘Indradhanush’ to infuse Rs 70,000 crore in state-owned banks over four years, while they will have to raise a further Rs 1.1 trillion from markets to meet their capital requirements in line with global risk norms Basel-III. In line with the blueprint, public sector banks were given Rs 25,000 crore in the last fiscal and an equal amount is planned for the current fiscal.