Public sector banks may get more funds next January
The government, which recently infused ₹22,915 crore into 13 public sector banks (PSBs), will once again review the recapitalisation requirement for all the lenders in January next year.
Depending on the credit demand, and banks’ level of nonperforming assets (NPAs) — loans that do not yield returns — the government will allocate more money, if needed.
The decision on the matter would be taken after a thorough scrutiny of the situation, senior government officials said.
Apart from reviewing the capital needs, the finance ministry will also scrutinise the performances of the lenders that have already been recapitalised.
“The government will review the situation again in January to understand the needs of individual banks. The banks that have been recapitalised will give an account of how the money has been utilised so far,” a senior finance ministry official, who did not wish to be identified, told HT.
State Bank of India, Punjab National Bank and Indian Overseas Bank are among the 13 lenders that have been recapitalised so far. While SBI has been given ₹7, 575 crore ,PNB got ₹2816 crore and Indian Overseas Bank received ₹3101 crore.
Public sector banks, which have to meet the new stringent Basel III, or capital adequacy norms, are in dire need of funds. Finance minister Arun Jaitley, while presenting the Union Budget, had announced a sum of ₹25,000 crore as recapitalisation for PSBs for 2016-17.
“We have only provided 75% of the recapitalisation amount that was earmarked... The remaining amount will be given to them, only if they manage to adhere to their targets and projections,” the official added.
The finance ministry is keeping an eye on the progress of the banks after they reported a combined net loss of ₹18,000 crore for the previous financial year. Based on their performances, they will be eligible for recapitalisation by the government.
As part of the seven-point reform programme Indradhanush launched on August 14 2015, the government announced ₹70,000 crore for recapitalising the cash-starved PSBs over the next four years.
Jaitley, however, has assured banks that the government would provide more capital to them, if they required.
Gross NPAs stood at 7.7% of total advances as on March 2016.
The Financial Stability Report released recently by the RBI has said bad loans could further increase to 8.5% of total advances by March 2017.