Recap plan will monitor loans above Rs 250 crore
Aiming at maintaining healthy books of public sector banks, Finance Minister Arun Jaitley, on Wednesday, charted out the government's recapitalisation plans, underlining that all loans above Rs 250 crore will undergo special monitoring. The capital infusion plan for 2017-18 includes Rs 80,000 crore through recap bonds and Rs 8,139 crore as budgetary support. "We have announced Rs 2.11 lakh crore recapitalisation of PSBs in October 2017. I have already moved a supplementary grant in Parliament on this. The entire objective of this exercise has been that it is government's prime responsibility to keep PSBs in good health," Jaitley told reporters at a press meet. "We inherited a very major problem. The problem is of the past. Our objective was to find solution and create an institution so that the mistakes are not repeated," he said. The government has decided to give Rs 8,800 crore to the SBI, Rs 5,375 crore to Bank fo Baroda, Rs 4,865 crore to Canara Bank and Rs 4,524 crore to Union Bank among various other PSBs.
Jaitley said while planning recapitalisation the government had two objectives which bank would get how much money and various steps to be taken to ensure that the PSBs follow higher standards. There are 21 PSBs in the country that comprise 70 per cent of the banking industry, said Rajiv Kumar, Banking Secretary. "As discussed earlier this recapitalisation will be front loaded depending on the performance and merit of the PSB," said Kumar. Allaying fears, he said: "Depositors' money in PSB is safe." He also added that PSBs should give loans responsibly so that there are no non-performing assets.
IDBI Privatisation
Jaitley also told reporters that the government decision on privatisation of IDBI Bank stands and it will be implemented at the right time. "One of the objectives in supporting the non-PCA (Prompt Corrective Action) banks has been that these are the banks where robust lending has to take place so that they are able to support growth, lending and the economy itself," he said while unveiling banking sector reforms. For the PCA banks, he said, the principle objective appears to be that they maintain their regulatory capital and it has been the criterion followed for IDBI. "The original decision stands. It's has not been reconsidered but there is always a time for implementing a decision," he said. Jaitley had said in 2016 that India is not ready for privatisation of PSBs and their present characteristics will continue except for IDBI Bank.
"We are trying to consolidate some of the banks, which may otherwise find it difficult in a competitive environment ... In one case we are thinking of reducing the government stake to 49 per cent, IDBI Bank," he had said. Asked why privatisation in financial space is not taking place, he had said, "In order to reach a particular level of reform, you have to evolve into that stage of public opinion...”