Central govt employees may have to share part of Pay Commission hike for PSU banks' fund

IN A bid to strengthen the health of the PSU banks grappling the rising NPAs, the Centre is considering a scheme for encouraging its staff to invest part of their 7th Pay Commission salary hike in a fund that may be used for the recapitalisation of these state-owned banks.
The high-income government official could be roped in to invest in the fund by offering lucrative incentives...
like a tax break or higher return, say media reports.
As per the proposal, higher income government staff from the rank of Section Officer may be asked to shell out 50 percent of hiked salary towards bank capitalisation bonds.
Top Finance Ministry officials had a discussion over the issue last week. However, no decision has been taken yet. The Committee of Secretaries is looking into the matter and various alternatives are being considered.
The PSU banks are facing a gross non-performing assets (NPAs) of Rs 3.61 lakh crore at the end of December 2015, as against Rs 39,859 crore in the private sector.
The Reserve Bank of India (RBI) has asked public sector banks to clean up balance sheets by March next year. Cleaning to books would require additional capital infusion than what has been envisaged in the 'Indradhanush'.
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 lakh crore from markets to meet their capital requirements in line with global risk norms Basel-III.
Under the scheme, the public sector unit (PSU) banks were given Rs 25,000 crore in the last fiscal and an equal amount is planned for the current fiscal. As per the plan, Rs 10,000 crore each would be infused in 2017-18 and 2018-19.
It is believed that the government provided as much as Rs 70,000 crore in the Union Budget 2016-17 for implementation of 7th Pay Commission for 47 lakh government employees and 52 lakh pensioners.
While the Budget 2016 did not provide an explicit overall provision number, the government had said the 7th Pay Commission hike has been built in as interim allocation for different ministries. Implementation of the pay commission report is to cost the government Rs 1.02 lakh crore.
The seventh central pay commission has recommended a 23.55 per cent hike in the cumulative earnings of serving and retired central government employees, saddling the Union government with a bill of Rs 1.02 lakh crore in the next financial year. The figure of 23.55 per cent covers the increases in pay, allowances and pension.