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Public sector banks may get more than Rs 25,000 cr govt capital this week

New Delhi - The finance ministry is likely to finalise a capital infusion plan for public sector banks this week based on the request of various lenders affected by demonetisation amid rising bad loans.

The final touches are being given based on the feedback from banks and the plan should be ready by this week, sources said.

The capital infusion will be more than Rs 25,000 crore announced in the earlier budget and the additional requirement will reflect in the final batch of the supplementary demand for grants to be presented in the upcoming budget, they said.

Representational image. Reuters

Representational image. Reuters

Saddled with rising bad loans, banks have made a case for a higher capital infusion that is reflected in their demands sent to the ministry, sources added. Besides, their normal business has been hit during demonetisation.

The government has announced a fund infusion of Rs 22,915 crore, of the Rs 25,000 crore earmarked for the 13 PSU banks for the current fiscal. Of this, 75 per cent have been released to them.

The first tranche was announced with an objective to enhance their lending operations and enable them to raise more money from the market.

The capital infusion for this fiscal is based on an assessment of the compounded annual growth rate of credit growth for the last five years, banks' own projections of credit growth and an objective assessment of the potential for growth of each banks, the ministry had said.

Under the Indradhanush road map announced last year, the government will infuse Rs 70,000 crore in state banks over four years, while they will have to raise a further Rs 1.1 lakh crore from the market to meet their capital requirements in line with global risk norms under Basel-III.

PSU banks are to get Rs 25,000 crore in each fiscal - 2015-16 and 2016-17. Besides, Rs 10,000 crore each would be infused in 2017-18 and 2018-19.

However, a month ago, finance minister Arun Jaitley had nudged banks to think "out-of-box" while doing business and dealing with challenges, even as state-owned banks sought a higher capital support and tax incentives for senior citizens parking money in fixed deposits.

"The current fiscal is not a conventional year as many major reformative decisions have been taken during the year. There is a need for out-of-box thinking as a series of steps are required about what the government can do and what the banks can do," Jaitley had said.

Stating that the banking sector is the backbone of our economy, Jaitley said he "did not see any serious challenges as far as structural changes were concerned".

For full coverage of Union Budget 2017, click here


Updated Date: Jan 16, 2017 08:07 AM

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