Recapitalisation programme unveiled in October 2017
new delhi — The Indian government said it will enhance capital infusion in public sector banks to ₹830 billion, taking the total to ₹1.06 trillion for the fiscal year.
The capital will be pumped in over the next few months, Finance Minister Arun Jaitley said, adding that the move will increase the lending capacity of public sector banks, as well as help some of them come out of the Reserve Bank of India’s watchlist.
The government had earlier announced an infusion of ₹650 billion in public serctor banks in 2018-19, of which ₹230 billion has already been disbursed, while ₹420 billion is remaining.
The government sought parliament’s approval for infusion of an additional ₹410 billion.
This amount, sought to be infused in the banks through issue of government securities (recapitalisation bonds), is over and above the ₹2.11 trillion recapitalisation plan announced in October 2017.
The recapitalisation, the finance minister said, will enhance the lending capacity of state-owned banks and help them come out of the RBI’s Prompt Corrective Action (PCA) framework.
“Now this ₹1.06 trillion this year and ₹830 billion that is remaining is going to be utilised under four different heads. The first of course is to ensure that banks meet their regulatory capital norms,” Jaitley said. “The second will be that the
Finance Minister Arun Jaitley and Banking Secretary Rajeev Kumar addressing a Press conference in New Delhi. —
better-performing banks under PCA are given capital to achieve a 9 per cent capital to risk weighted assets ratio and required capital conservation buffer and the 6 per cent net NPA requirements so that some of them are able to come out of PCA itself,” he added.
The third category will be the non-PCA banks, which are very close to the PCA red line and will be provided capital so that they do not come under the framework. Some capital will also be provided to banks that are going to be amalgamated to meet regulatory norms and growth capital, Jaitley added.
Earlier this year, the government had announced merger of Dena Bank and Vijaya Bank with Bank of Baroda.
Jaitley also said the non-performing assets (NPAs) recognition, started in 2015, is almost complete, and the September quarter has shown decline in bad loans.
Gross NPAs of public sector banks started declining after peaking in March 2018, registering a reduction of ₹238.6 billion in the first half of the fiscal year. —
₹2.11t