Govt giving final touches to bank recapitalisation bonds

The Finance Ministry is in the process of fixing the nuts and bolts of the Rs 1.35 lakh crore recapitalisation bonds for public banks and the framework is expected to get nod from the Finance Minister in the next few days, reports PTI.

The Department of Financial Services, in consultation with the Reserve Bank of India (RBI), has submitted proposals to the Department of Economic Affairs, which is working on the final structure, a government official told the news agency on Wednesday, adding that the final structure will be known in the next few days after approval from the Finance Minister.

The framework, once cleared, will go to Parliament for necessary approvals, another official told the news agency. The upcoming winter session of Parliament will begin on December 15 and continue till January 5. Last month, Finance Minister Arun Jaitley had announced an unprecedented Rs 2.11 lakh crore, two-year road map to strengthen public sector banks (PSBs). The plan included re- capitalisation bonds of Rs 1.35 lakh crore. The finance minister had said that multiple options for recapitalisation bonds were on the government table, that they were being examined and that the best ones would be explored.

Once the structure is in place, the government will frontload bond issuances, and a preliminary assessment indicates that it could be between Rs 70,00080,000 crore, the official added. The funding is expected to help strengthen the financials of NPA-hit banks. Non-performing assets (NPAs) of public sector banks alone have increased to Rs 7.33 lakh crore as of June 2017, from Rs 2.75 lakh crore in March 2015. Besides recapitalisation bonds, the Finance Minister had announced that banks would get about Rs 18,000 crore under the ‘Indradhanush’ plan over the next two years.

Under the Indradhanush road map announced in 2015, the government had announced an infusion of Rs 70,000 crore in stateowned banks over four years, while they will have to raise a further Rs 1.1 lakh crore from the market to meet their capital requirement, in-line with global risk norms, known as Basel-III. In the last three-and-a-half years, the government has pumped in Rs 51,858 crore into the PSBs. The remaining Rs 18,142 crore will be injected into the banks over the next two years.