As part of its recapitalisation roadmap, the finance ministry said on Wednesday that Rs 88,139 crores will be infused into 20 public sector banks in 2017-18, including Rs 80,000 crores through recapitalisation bonds and Rs 8,139 crores as budgetary support.
Another Rs 10,312 crores funds will be raised from the market for the current fiscal, taking the total capital inflows to around Rs 1 lakh crores in 2017-18. In October, the government had unveiled Rs 2.11 lakh crore two-year capital infusion plan in state-owned banks to strengthen their balance sheets. This will free state-owned banks’ balance sheets so that they can start lending.
Finance minister Arun Jaitley said steps need to be taken to ensure that the governance of banks follows the highest standards. “We inherited a very major problem and therefore have been involved in finding a solution to that problem,” he said. “Now the entire object of this exercise is that the government has the prime responsibility
of keeping the public sector banks in good health,” Mr Jaitley said.
The finance ministry said that the Rs 80,000 crore recapitalisation bonds, to be issued to public sector banks (PSBs), will not have impact on fiscal deficit as they will be cash neutral.
Economic affairs secretary S.C. Garg said that these bonds will not have Statutory Liquidity Ratio (SLR) and have tenure of 10-15 years. SLR is a portion of deposits that banks need to invest in government securities.
Rajeev Kumar, secretary, department of financial services, said bank recapitalisation is dependent on performance and reforms undertaken by the lenders. He said loans above Rs 250 crore will undergo special monitoring and red flags whenever the original covenants of the loans are violated. Bank have also been instructed to become more professional. Finance ministry would gauge the performance of banks on parameters like customer responsiveness, responsible banking, credit offtake, MSME lending, deepening financial inclusion and digitalisation.
IDBI Bank will get the most capital infusion of Rs 10,610 crore in the current fiscal. State Bank of India will get Rs 8,800 crore capital and Bank of India, Rs 9,232 crore. UCO Bank will get Rs 6,507 crore; Punjab National Bank Rs 5,473 crore; Bank of Baroda Rs 5,375 crore; Central Bank of India Rs 5,158 crore; Canara Bank Rs 4,865 crore; Indian Overseas Bank Rs 4,694 crore and Union Bank of India Rs 4,524 crore. Oriental Bank of Commerce would get Rs 3,571 crore while Dena Bank Rs 3,045 crore, Bank of Maharashtra Rs 3,173 crore, United Bank of India Rs 2,634 crore,
Corporation Ban Rs 2,187 crore, Syndicate Bank Rs 2,839 crore, Andhra Bank Rs 1,890 crore, Allahabad Bank Rs 1,500 crore, Punjab and Sind Bank Rs 785 crore.