The government today approved a PSU Banking Recap plans of Rs 2.11 lakh crores, which include recap bonds, market raising and Budgetary support.
Along with the capitalisation plan, the government also has plans to reform the banking sector, Jaitley said.
"Whether the bonds would increase the fiscal deficit, would be known only in due course," the FM said.
Apart from the impact on the fiscal deficit, markets were worried on the yields. The term and the tenure of the bonds have not been decided as yet. Also, it was not known on what basis each bank would be allocated capital. There are fears that banks, which have not been able to manage their non performing assets, may be given a lesser amount.
Between 2014-15 and 2017-18, banks have made provisions of over Rs 3 lakh crore, more than 10 times the amount made in the preceding 10 years.