Govt to infuse Rs 70,000 crore into public sector banks

NEW DELHI: The government today laid out a roadmap for the next four years for PSU banks, according to which, the government will provide Rs 70,000 crore for their capital requirements for the next four years while the remaining Rs 1.10 lakh crore will have to be raised from the market by the banks.

Sanjeev Sharma

Tribune News Service

New Delhi, July 31

The government today laid out a roadmap for the next four years for PSU banks, according to which, the government will provide Rs 70,000 crore for their capital requirements for the next four years while the remaining Rs 1.10 lakh crore will have to be raised from the market by the banks.

The Finance Ministry has estimated a capital requirement of Rs 1.80 lakh crore for the PSU banks. It will provide Rs 25,000 crore each in the current fiscal year and the next and Rs 10,000 crore in the remaining years up to 2019, totalling Rs 70,000 crore.

The Finance Ministry has sought Rs 12,000 crore in supplementary grants from Parliament to meet capital infusion requirements this year. The remaining Rs 5,000 crore would be provided in the second Supplementary later this year.

Around Rs 7,940 crore had already been provided in this year’s Budget.

The Finance Ministry said there has been lower profitability of public sector banks, mainly due to provisioning for the restructured projects and gross NPAs. It attributed this to a variety of legacy issues, including the delay caused in various approvals as well as land acquisition and also because of low global and domestic demand, many large projects are strained. The Public sector banks, which have got predominant share of infrastructure financing, have been affected by this phenomenon.

“Improved valuations coupled with value unlocking from non-core assets and improvements in capital productivity, will enable the PSBs to raise the remaining Rs 1.10 lakh crore from the market,” the Finance Ministry said.

However, it assured that the government was committed to making extra budgetary provisions in FY 18 and FY 19, to ensure that the PSBs remain adequately capitalised to support economic growth.

Financial Services Secretary Hasmukh Adhia said the Rs 20,000-crore capital infusion would happen as early as possible. Of the total amount, Rs 10,000 crore would be provided to weak PSBs, Adhia said, adding the non-performing assets of PSBs are likely to show improvement in next two quarters.

Another Rs 10,000 crore will be allocated to the top six big banks, namely SBI, BOB, BOI, PNB, Canara Bank and IDBI Bank, in order to strengthen them to play a vital role in the economy.

Adhia said third tranche of capital infusion will come in the last quarter of the current fiscal which will be given to banks which will show improvement in their performance in the nine-month period. The roadmap for the banks saw a reflection in the stock market, which shot up 409 points with most of the PSU bank stocks in the green.