RBI says Rs 7,940 cr to recapitalise banks insufficient, seeks more funds

New Delhi: The Reserve Bank today said Rs 7,940 crore earmarked for recapitalisation of public sector banks in the current fiscal is not adequate and has asked finance ministry to increase the quantum of assistance in view of mounting bad loans and to support growth.[caption id=“attachment_2286186” align=“alignleft” width=“380”]  The RBI logo. Reuters[/caption] “We have been suggesting to the finance ministry from time to time that the public sector banks need more capital than what budget has indicated. So, we have been raising this issue at various discussions and forums and it was also formally written by Reserve Bank of India,” RBI deputy governor SS Mundra said in New Delhi. “Budgeted amount which is over Rs 7,000 crore will not be adequate from the both perspective for enabling the bank for clean up of the books which is required and growth when it comes back, to support it,” he said. Last fiscal, government infused Rs 6,990 crore in nine public sector banks based on their performance. Asked about additional quantum of infusion needed beyond the budget amount, Mundra said there is no single way of calculation on the requirement and it is based on various factors. “We have done some broad calculation for entire part of Basel-III committee implementation… What we are trying to indicate is that at this point of time because of certain stress on the book some capital would be consumed for cleaning of the books,” he said. That cleaning is vital because when growth returns capital would be needed to support it, he said, adding that growth can be well supported with cleaner balance sheet rather than with a stress on books. “That is the whole idea of increased capital. It can partly help to clean the balance sheet. Make the balance sheet ready to support when growth returns, additional capital will support the growth also,” he said. Talking about setting up of a trading platform for receivables, Mundra said: “We have already invited applications and quite a few applications have been received by RBI. They are currently under scrutiny.” Receivables are basically bills or monetary obligations owed to a company by its customers. If such trading platform is set up, then it would provide cash flow to MSME against such receivables. It will help them overcome cash crunch. “I would urge and hope that somehow if legislative process is brought in which makes mandatory for large corporates, public sector units and the government departments to compulsorily register on (receivables) trading platform so that when the small and medium units has done any supply to any of these institutions then the payment of receivables on due date becomes legal obligation,” he said. “I believe recovery of dues is a major challenge for MSME so if it can become a legislative process or part of statute it will go a long way in supporting the sector,” he said. PTI