Bank recapitalisation: Govt to infuse Rs 88,169 cr capital in 20 PSBs; recap bonds to have 10-15 yr tenure

The Narendra Modi government on Wednesday announced the details of the capital infusion plan for state-run banks originally announced in October to fill the funding gap of public-sector banks (PSBs). In October, the government had said it will infuse Rs 2.11 lakh crore in state-run banks based on efficiency and merit parameters.These include customer responsiveness, responsible banking, credit offtake through technology & cleanliness, MSME friendly banks, financial inclusion and digitisation deepening.

File image of Union Finance Minister Arun Jaitley. PTI

File image of Union Finance Minister Arun Jaitley. PTI

Out of the total, Rs 1.35 lakh crore will come from recapitalisation bonds, while the remaining will be a mix of regular annual capital infusion and fund raising from the market, it had said.

Today (Wednesday), union finance minister, Arun Jaitley and financial services secretary, Rajiv Kumar, offered more clarity on this plan, as per which country's largest lender, State Bank of India (SBI) will receive Rs 8,800 crore from the government. Commenting on the details of re-cap bonds, Economic Affairs Secretary S C
Garg said that these bonds will carry a maturity of 10-15 years and will be treated as non-SLR bonds.

In total, the government will infuse Rs 88,139 crore in the current fiscal in 20 public sector banks,Kumar said. Of this, IDBI Bank will get Rs 10,610 crore, Bank of India will receive Rs 9,232 crore, Uco Bank Rs 6,507 crore, Punjab National Bank Rs 5,473 crore, Bank of Baroda Rs 5,375 crore and Central Bank of India 5,158 crore.

Jaitley said the Department of Financial Services has been undertaking a detailed exercise as to the amount of capital that needs to be infused into public sector banks. "The main objective of this flows from the government's responsibility to keep public sector banks in good health," Jaitley said, adding "We wish to build an institutional mechanism to ensure that the problems that we inherited do not recur."

During the meet, Kumar observed that repositioning PSBs to lead the growth and serve people responsibly and responsively and the economy has gained traction in terms of economic growth, higher rating, credit offtake. Further, Kumar said that the government promised to give capital on the basis of performance, merit and assured that depositors' money in PSBs is safe and there will be no scenario wherein a PSB will face failure. The government will ensure that all PSBs maintain minimum regulatory capital, Kumar said.

Kumar said, it is proposed that every banks shall have minimum 10 percent exposure in a consortium borrower. All loans above Rs 250 crore will undergo special monitoring, adding breach of any loan covenant will be shared with entire lending consortium as a red flag. All banks should not get into all activities, must concentrate on core strengths. Each bank to adopt a policy in accordance with their core strengths. PSU banks need to identify non-core assets to monetise, Kumar added.

Updated Date: Jan 24, 2018 18:10 PM

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